Bank of England’s latest decision on base rate

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7-2 to maintain the base rate at 4% at its September meeting⁽¹⁾.

Two members of the MPC had voted instead to reduce it to 3.75%.

In setting out the context to the vote, the MPC said: ‘There has been substantial disinflation over the past two and a half years, following previous external shocks, supported by the restrictive stance of monetary policy. That progress has allowed for reductions in Bank Rate over the past year. The Committee remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term.’

The MPC pointed out that underlying disinflation has generally continued, although with greater progress in easing wage pressures than prices.

It reported: ‘Twelve-month CPI inflation was 3.8% in August, and is expected to increase slightly in September, before falling towards the 2% target thereafter. The Committee remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process. Pay growth remains elevated, but has fallen and is expected to slow significantly over the rest of the year. Services consumer price inflation has been broadly flat over recent months. Upside risks around medium-term inflationary pressures remain prominent in the Committee’s assessment of the outlook.’

Reacting to the decision, Dr David Crosthwaite, chief economist at BCIS, said: ‘The Bank of England has a real dilemma. On the one hand they want to support the economy by lowering the cost of borrowing, but on the other their remit is to control price inflation and get close to the 2% target.

‘Unfortunately, today’s announcement will probably do neither. With the base rate remaining at 4%, the cost of borrowing is still relatively high compared to the recent past, and is not likely to spur investment, which actually might be the point as investment leading to growth is likely to be inflationary.

‘Therein lies the problem. Inflationary pressures remain with inflation proving stubbornly sticky, and until it starts to come down the Bank really have little room for manoeuvre.’

The MPC’s next vote will be published on Thursday 6 November 2025.

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^{(1) Bank of England – Bank Rate maintained at 4% – September 2025 – here}