Bank of England holds interest rates at 4%
UK interest rates will remain unchanged but policymakers are 'deeply divided'
The Bank of England has announced interest rates will be held at 4%.
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UK interest rates will remain unchanged but policymakers are “deeply divided” about the threat of inflation, economists say.
The Bank’s Monetary Policy Committee (MPC) made the decision on Thursday, with economists making the decision following signs that inflation is continuing to cool.
It also comes ahead of Rachel Reeves' November’s autumn Budget, with economists urging caution ahead of any announcements.
Earlier this month, some experts, including banking giants Barclays and Goldman Sachs, are predicting a cut to 3.75%.
Read more: Child poverty is driving UK apart, Gordon Brown warns ahead of Budget
The decision comes amid concerns policymakers could be swayed by recent economic data which signals a need to reduce borrowing costs further.
Most economists agree that there will be divisions among the nine-person committee when it comes to this week’s vote.
James Smith, a UK developed market economist for ING, said: “Inflation has almost certainly peaked.
“Food inflation – a critical concern at the Bank of England this summer – fell back in September and is now running half a percentage point below official forecasts.
“This all comes at a time when the Bank is visibly divided on how problematic inflation really is.”
Official figures showed that UK Consumer Prices Index (CPI) inflation stayed at 3.8% in September, the same level as both July and August, with food prices easing during the month.
But Mr Smith said that, while the MPC was “deeply divided”, it will likely remain cautious about the risk of inflation being persistent and opt to keep rates on hold this month.
The headline figure came in below the 4% that many economists had been expecting.
He also said the Bank was crucially waiting on the outcome of the Budget on November 26, adding: “While the contours of the Budget are becoming clearer, the Bank’s rules mean it can’t act on Government policy until it’s official.”
He added that an interest rate cut in December was now “becoming more likely” in response to potential tax-raising measures.
On the other hand, Jack Meaning, chief UK economist at Barclays, predicted that the recent inflation data would be enough to tip policymakers towards cutting rates on Thursday.
Coupled with data pointing to slowing wage growth among UK workers, he said this would be likely to give the committee more confidence that inflation was set to ease.
It comes after economists at US investment bank Goldman Sachs also predicted that recent figures would be enough to convince the Bank to cut rates to 3.75%.
This marks a shift in sentiment after many experts were ruling out a rate cut in November and said borrowing costs may not be reduced until 2026, coming as a setback to millions of mortgage holders still expected to refinance on to higher rates.