The Bank of England has elected to hold interest rates steady ahead of the British government’s upcoming budget.
The vote to hold interest rates at current levels narrowly passed, with five of the nine-member monetary policy committee voting to hold the Bank Rate at 4%.
The other four members voted in favour of a 25-basis point rate cut.
In a written statement, the British central bank said that the inflation rate, at 3.8% in September, had likely peaked and that a disinflationary trend is now underway.
The Bank of England cautioned that any future interest rate cuts “will therefore depend on the evolution of the outlook for inflation…”
Yields on United Kingdom (U.K.) government bonds fell after the rate decision was announced, with the yield on the benchmark 10-year bond dropping almost three basis points.
The central bank meeting and interest rate decision was the last one before the U.K. government delivers its latest budget on Nov. 26.
The government is widely expected to raise taxes as it looks to cover a fiscal deficit estimated at $65 billion U.S.
Still, a majority of economists expect the Bank of England to lower interest rates at its next meeting in December and cut further over the coming year in response to cooling inflation.
The current outlook calls for the Bank of England to cut interest rates by 25 basis points twice in 2026, taking the Bank Rate down to 3.50% or 3.25%, depending on what happens in December.
