FX.co ★ BoE Likely to Maintain Rates

The Bank of England is anticipated to maintain its benchmark interest rate at 4% during the September 2025 meeting, following a 25 basis points reduction in August. This decision comes as the bank manages a sluggish economic growth while grappling with persistently high inflation levels. In August, the Consumer Price Index (CPI) recorded an increase of 3.8%, consistent with July's 18-month peak. Inflation is projected to reach 4% in September, with expectations that it will stay above the 2% target until the spring of 2027. Although basic pay wage growth has decelerated to 4.8%, the labor market continues to apply upward pressure on prices. Economic growth in the UK remains tepid, with an expansion of merely 0.2% over the three months ending in July. The Bank of England is likely to proceed cautiously with its quantitative tightening strategy, slowing the £100 billion annual reduction in gilt holdings amid market volatility; these holdings have decreased from £875 billion in 2022 to £558 billion. Governor Andrew Bailey has indicated that the trajectory of interest rates is "open," and surveys suggest that the Monetary Policy Committee might downscale the gilt reduction to approximately £67.5 billion.