The Bank of England kept its benchmark rate at 4.0% in November, but the narrowest possible majority showed how close policymakers were to resuming cuts. Britain still had the highest inflation rate among the G7, yet softer jobs data and weaker growth were beginning to convince more officials that price pressure had peaked.
The latest
The Monetary Policy Committee voted 5-4 to hold rates. Governor Andrew Bailey joined the majority but said inflation risks had moved lower and that he wanted more evidence before voting for a cut. Headline inflation stood at 3.8%, while the Bank projected growth of 1.5% in 2025 and 1.2% in 2026. It also expected inflation to continue declining over time.
The underlying economics
The decision helps explain why headline inflation alone does not determine interest rates. Central banks look at wage growth, services inflation, employment, expectations, and the amount of spare capacity in the economy. If demand is weakening fast enough, future inflation can fall even while the current inflation rate remains above target.
The bigger picture
The vote shifted market attention toward the December meeting and the government’s budget. Tax increases or spending restraint could further weaken demand, strengthening the case for lower rates. At the same time, cutting too quickly could undermine confidence if inflation proves more persistent than expected.
Watch next
The next leg from 4% will probably depend on whether wage and services inflation continue to cool. A gradual decline in borrowing costs would help mortgage holders and businesses, but the Bank is unlikely to move aggressively unless the labor market weakens substantially. The 5-4 vote made clear that the debate had shifted from whether cuts were possible to how soon they could safely resume.