The Bank of England held its benchmark rate at 4.0% after a narrow 5-4 split vote by the Monetary Policy Committee (MPC), signalling growing division over how quickly to begin easing policy as inflation slows but remains above target.
BoE Holds Rates After 5-4 Split as Inflation Cools
6 November 2025 - 17:56 CET
Economists had expected a wider 6-3 vote to hold, making the result slightly more hawkish than forecast. The MPC judged that inflation has likely peaked, with pay growth and services inflation continuing to ease. Headline CPI rose 3.8% in October, below the 4.0% forecast by the Bank, reinforcing the gradual disinflation trend seen since mid-2024.
In its Monetary Policy Report, the Bank said the ‘restrictiveness’ of policy has already eased somewhat and, if progress on disinflation continues, the Bank Rate is likely to follow a gradual downward path. That guidance stops short of committing to cuts but suggests a more dovish bias heading into 2026.
Market and policy backdrop
The decision follows political pressure to lower borrowing costs ahead of the government’s budget announcement. Earlier this week, Chancellor Rachel Reeves said prolonged high rates were hurting business investment. Governor Andrew Bailey deflected questions about fiscal coordination, stating, "It is not for us to speculate on what will be in the Budget.”
Markets saw the yield on the interest rate-sensitive two-year bond decline by two percentage points to 3.79%. The pound initially weakened against the dollar before regaining ground to trade at £1.31.
On the AI bubble
MPC members were also asked about the potential economic impact of artificial intelligence. Bailey warned of speculative excess, saying, “We could have a bubble, because the markets are pricing the future stream of returns from this, and that's uncertain.” Deputy Governor Dave Ramsden added that if such a bubble were to burst, "It would represent a tightening in financial conditions that would weaken global demand.”
The Bank’s message reflects a cautious shift: inflation is falling faster than expected, but policymakers remain wary of easing too soon while global risks, from AI exuberance to fragile growth, continue to shape the outlook.
