6 November 2025
If you are covering the Bank of England’s decision to hold interest rates at 4%, please find below a comment from Lindsay James, investment strategist at Quilter:
“With predictions of a rate cut at today’s meeting growing louder by the day, the Bank of England has blocked out the external noise and chosen to hold rates at 4%. Governor Andrew Bailey effectively had the casting vote and given he has been seen to be sitting on the fence regarding this rate decision, it is perhaps no surprise he has taken a more cautious approach, particularly given the UK continues to suffer from higher inflation compared to peers.
“A month ago, a rate cut by year end was seen as just around a 25% probability but is now given a more than evens chance. Inflation climbed through the summer, with food inflation exceeding 5%. This had been a concern for the committee as because it is a frequent consumer ‘touch point’, it can have more influence on consumer inflation expectations than other areas. Higher expectations typically mean higher wage demands and thus higher prices, in what is known as the dreaded ‘wage price spiral’.
“However, the latest inflation report was more encouraging, and the BoE believes inflation has peaked, potentially opening the door for a pre-Christmas rate cut. Food inflation fell back to 4.5%, below the expectations of the BoE. This has been driven both by supermarket discounting but also because core ingredients like diary goods, cocoa and sugar have seen prices falling back in recent months. Similarly wage growth in the private sector has been coming down amid a weaker labour market, with wages an important contributor to services inflation.
“This will be a blow to Rachel Reeves and the government in the lead up to the Budget. The economy continues to hold up with GDP growth in 2025 expected to land at around 1.5%, but 2026 is looking increasingly challenging. Government spending is expected to grow more slowly, while the jobs market continues to weaken. With a fresh set of tax hikes incoming, the Chancellor would have liked to have been in a position where rates were below 4%. Instead, she will have to hope for further falls in inflation to pave the way for additional cuts to the base rate. For now, it is up to her Budget to help stimulate the economy noticeably, but as her speech earlier this week suggested, the government will be acting in the opposite direction.”
