The Bank of England is widely expected to keep interest rates at 4% when its Monetary Policy Committee (MPC) announces its decision on Thursday.
The rate, which directly affects borrowing and savings, was cut from 4.25% in August, the lowest in more than two years. Many analysts believe the Bank is unlikely to reduce rates further this year, especially with inflation still running high.
Official figures released on Wednesday showed inflation holding at 3.8% in August, nearly double the Bank’s 2% target. While raising borrowing costs is meant to slow spending and cool inflation, policymakers also risk weakening the economy if they go too far.
Governor Andrew Bailey described last month’s cut as a “finely balanced” decision. Analysts say Thursday’s vote is expected to be clearer, with rates left unchanged.
The Bank rate has a major impact on mortgages, as lenders use it to set their own rates. Fixed-rate mortgage costs have dipped slightly since the August cut, but further declines remain uncertain. Savers, meanwhile, have seen returns fall, with average easy-access savings rates now below 3%.
“Many will be waiting with bated breath for the Budget,” said Rachel Springall of Moneyfacts. “With inflation still above target, it looks unlikely we’ll see more rate cuts this year.”
The government would welcome lower rates to help boost growth, but inflation risks remain. Prices are easing more slowly in the UK than in countries like the US, Germany and France.
Globally, the US central bank cut its rates on Wednesday to between 4% and 4.25%, while the European Central Bank left its key rate unchanged at 2% last week.
The Bank of England’s decision will be revealed at noon on Thursday.
