Bank of England Holds Base Rate at 4%

The Bank of England’s Monetary Policy Committee (MPC) voted on 18 September 2025 to keep the base rate at 4.00%. The decision reflects the continued challenge of controlling inflation while supporting a fragile UK economy.

Inflation currently stands at around 3.8%, still well above the Bank’s 2% target. Economic growth remains weak, and although wage growth is showing signs of easing, policymakers believe it is too soon to reduce rates. The MPC emphasised that uncertainty surrounding the Autumn Budget and wider economic conditions means interest rate policy must remain flexible.

The vote was not unanimous. Seven members opted to hold rates steady, while two argued for a small cut to 3.75%. This split reflects the difficult balance between tackling persistent inflation and avoiding further strain on growth and employment.

Changes to Quantitative Tightening

Alongside its decision on rates, the Bank also announced adjustments to its quantitative tightening programme. The annual reduction in gilt holdings will be scaled back from £100 billion to £70 billion, and fewer long-dated gilts will be sold. These steps are intended to reduce pressure on financial markets while ensuring the Bank remains committed to bringing inflation under control.

Impact on Households and Businesses

For households, today’s decision means variable and tracker mortgage holders will see little immediate relief from high repayments. Fixed-rate mortgages remain more costly than in the past, and savers continue to enjoy stronger returns than in previous years, although inflation reduces the real value of interest earned. Businesses and individuals planning to borrow should budget carefully, as finance costs are expected to remain elevated in the near term.

Future decisions will depend on economic data and government policy. Inflation trends, wage growth, employment levels and the upcoming Autumn Budget will all play a role in shaping whether the MPC decides to cut rates or maintain them at the current level.

What Clients Should Consider

In the current climate, it is important to review your financial arrangements. Mortgage holders may wish to explore whether fixing their rate offers stability, savers should continue comparing accounts to make the most of available returns, and borrowers should plan conservatively given the likelihood of higher borrowing costs for some time.

In Summary

The Bank of England’s decision to hold the base rate at 4.00% demonstrates its commitment to reducing inflation while safeguarding financial stability. Although this provides some consistency in the short term, the outlook remains uncertain, with future moves depending on how inflation and the wider economy evolve over the coming months.