Finance
Instant view: Bank of England keeps rates on hold in knife-edge vote
Published by Global Banking and Finance Review
Posted on November 6, 2025
5 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on November 6, 2025
5 min readLast updated: January 21, 2026
The Bank of England held interest rates steady in a 5-4 vote, signaling potential cuts as inflation shows signs of slowing. The pound weakened slightly.
LONDON (Reuters) -The Bank of England kept rates unchanged on Thursday in a tight decision following recent signs that inflation is slowing, which brought the pound below the highs of the day, while boosting UK government bond prices.
The pound was last up 0.2% on the day at $1.30799, from around $1.30925 prior to the decision. It weakened a touch against the euro, which was up 0.1% at 88.1 pence, from 87.98 earlier.
British government bond yields fell, with two-year gilt yields last trading at 3.78%, down 3 basis points on the day and down from 3.802% previously, while the blue-chip FTSE-100 index was down 0.2%, having pared some of the day's losses.
COMMENTS:
SANJAY RAJA, CHIEF UK ECONOMIST, DEUTSCHE BANK, LONDON:
"We continue to think that the MPC will cut Bank Rate once more this year – taking Bank Rate to 3.75% by year-end. We also maintain that Bank Rate will likely settle closer to 3.25% by summer next year. The big question now is whether there is enough dovish momentum in the data to back a faster reduction in Bank Rate over the first half of next year."
KIRSTINE KUNDBY-NIELSEN, ANALYST, DANSKE BANK, COPENHAGEN:
"The bar for a December cut is definitely low, with only one vote needed to tip the scale. With significant tightening in the budget in a couple of weeks' time, this should further underpin this view of the next cut being delivered in December.
"For sterling, I still think we are in for more weakness with a dovish sentiment still present in the MPC. The cut is just postponed to the next meeting."
KENNETH BROUX, HEAD OF CORPORATE RESEARCH FX AND RATES, SOCIETE GENERALE, LONDON:
"There's certainly a dovish tone, for example they are talking about the upside risk to inflation decreasing, and that along with the voting split gives it a dovish feel. December is certainly in play, but not a done deal."
"It's going to be tough for the pound, but good for rates, especially at the front end."
NEIL WILSON, UK INVESTOR STRATEGIST, SAXO MARKETS, LONDON:
"No surprise cut, no fireworks - the market called this one, just. Andrew Bailey cast the deciding vote to hold rates unchanged at 4.0% in a 5/4 split with four members preferring to cut. The calculation is that it's best to wait until after the Budget before moving - no big risk in waiting six weeks is the assumption. But equally, I would argue: why wait?"
MICHAEL BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON:
"On the whole, it’s a more dovish decision than expected, it’s the narrowest possible margin in terms of the 5-4 vote."
"(There is) also a bit more of an explicit easing bias to the statement, having got rid of this reference to gradual and careful, and instead explicitly saying if there is further progress on disinflation then we are going to continue cutting rates."
"This is a Bank of England that is fairly confident that inflation has peaked, and it’s a Bank of England that clearly wants to continue lowering rates."
NEIL MEHTA, INVESTMENT GRADE PORTFOLIO MANAGER, RBC BLUEBAY ASSET MANAGEMENT, LONDON:
"The market was pricing in a 25% chance of a cut today, but it was always going to be a difficult one ahead of the Budget.
The fact that it was 5-4 means that Bailey really does have the swing vote here and the reason for a quite muted market reaction is that focus has shifted to December.
Bailey's comments do read more tilted towards the dovish side. If we have another month where wage and inflation remain in line I think December is very much a goal and Bailey will be tilted towards swinging that 5-4 towards a cut."
ZARA NOKES, GLOBAL MARKET ANALYST, JPMORGAN ASSET MANAGEMENT, LONDON:
“While there has been some positive news on the inflation front in recent weeks, the bottom line is that headline inflation is running at 3.8% - almost twice the BoE’s target."
"On the growth side, the labour market is cooling, but other economic data such as retail sales and consumer confidence paint a more resilient picture of the UK economy.
The balance of risks could shift next year if large near-term tax hikes are announced at the Autumn budget. But until there is more meaningful progress on bringing inflation down, the Bank must exercise a high degree of caution in lowering rates.”
GEORGE BROWN, SENIOR ECONOMIST, SCHRODERS, LONDON:
"Holding rates today was the right decision, with inflation still nearly double the 2% target. The Bank will be in a stronger position after the dust settles from the budget, armed with additional jobs and inflation data, to judge whether further easing is warranted in December."
"A cautious approach remains appropriate given the risk that high inflation becomes entrenched, due to sticky wage growth and subdued productivity. However, this may change if reports the Chancellor intends to double her fiscal headroom to 20 billion pounds($26.84 billion), through fiscal tightening in the region of 40 billion pounds, are true. Alongside mooted tax cuts on household energy bills, if these measures materialise, they could create scope for the Bank to cut multiple times next year."
MATHIEU SAVARY, CHIEF STRATEGIST, BCA RESEARCH, MONTREAL:
"The BoE opted for a dovish hold. The MPC is not rushed and is waiting for the Treasury’s Autumn Statement, but the labour market is clearly softening and wage inflation is slowing faster than the Committee expected this summer. With fiscal tightening ahead, a December cut remains our base case. We stay overweight gilts.”
($1 = 0.7451 pounds)
(Reporting by the Reuters Markets Team, Compiled by Amanda Cooper; Editing by Yoruk Bahceli)
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates in an economy to achieve macroeconomic objectives such as controlling inflation and stabilizing currency.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the amount borrowed or saved. They are influenced by central bank policies and economic conditions.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured as an annual percentage change.
The UK economy refers to the economic system of the United Kingdom, characterized by a mixed economy that includes a combination of private and public enterprises, with significant contributions from services, manufacturing, and finance.
Financial markets are platforms where buyers and sellers engage in the trade of assets such as stocks, bonds, currencies, and derivatives. They facilitate the flow of funds and provide liquidity to the economy.
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