UK interest rates likely to stay on hold amid persistent inflation and sluggish growth

The Bank of England is expected to keep interest rates steady at 4% as inflation remains above target and economic growth shows signs of slowing, with markets awaiting further clues from upcoming policy decisions and the November Budget.

Interest rates in the United Kingdom are widely expected to remain steady at 4% when the Bank of England’s Monetary Policy Committee (MPC) delivers its decision on Thursday. This follows a cautious reduction from 4.25% to 4% in August, which lowered the rate to its lowest level in more than two years. The MPC’s previous cut was narrowly decided in a closely-watched vote, reflecting the delicate balance policymakers face in managing inflation and economic growth. The Bank rate is the primary tool used by the Bank of England to influence borrowing costs and control inflation, where higher rates typically reduce spending and slow price rises, though at the risk of harming the economy.

Inflation in the UK remains significantly above the Bank of England’s 2% target, with official data released on Wednesday showing the Consumer Prices Index (CPI) steady at 3.8% in August. This persistent inflation is largely driven by rising costs in food and drink, which saw prices increase by 5.1% year-on-year, as well as hospitality and petrol costs. Inflation in the UK is notably higher compared to other major economies, such as the U.S. at 2.9% and the eurozone at 2.1%. Analysts and economists suggest that this elevated and persistent inflation leaves little room for further interest rate cuts this year, with many anticipating that rates will remain on hold until at least early 2026.

The ongoing inflationary pressure is compounded by wage growth, which, despite slowing, remains elevated at around 4.8% for basic pay. This combination of high inflation and relatively strong wage increases complicates the Bank’s task of controlling price growth without triggering economic weakness. UK economic growth has been sluggish, expanding just 0.2% in the three months to July, indicating low momentum in the economy’s second half of 2025. Consumer concerns about living costs persist, with longer-term inflation expectations rising to their highest since 2019, indicating that inflation worries are becoming more entrenched in public sentiment.

The Bank of England is also expected to slow down its quantitative tightening (QT) programme amid rising volatility in bond markets. QT involves the sale of bonds previously purchased to tighten monetary policy, which has come under scrutiny for potentially driving borrowing costs higher. Forecasts suggest the pace of bond sales may be reduced from £100 billion annually to around £60-67.5 billion, with a focus on shorter-term government bonds. Unlike other central banks, the Bank of England has continued selling bonds rather than waiting for them to mature, making the pace of QT a key factor market participants are closely watching.

Mortgages and savings continue to reflect market uncertainty. Mortgage rates have shown a slight decline since the last MPC meeting, but future movements are highly uncertain. Rachel Springall from financial information service Moneyfacts notes that with inflation forecasts remaining above target and the forthcoming Budget adding further economic considerations, lenders and borrowers are likely to adopt a wait-and-see approach. Saver returns have, meanwhile, declined in tandem with falling Bank rates, with average easy-access savings rates dropping below 3%. This trend has prompted calls for savers to review their accounts to secure better returns amid the low-rate environment.

Looking ahead, while some economists foresee possible interest rate cuts in 2026, any such easing depends heavily on inflation falling closer to target levels and the economic outlook stabilising. The government’s upcoming November Budget will also play a crucial role, as Chancellor Rachel Reeves faces the challenge of reviving growth and managing public finances in the face of ongoing inflation pressures. Reeves has acknowledged the strain on households and indicated that the Budget will include tax increases alongside cost-of-living measures. Critics argue that prior tax hikes on businesses have contributed to inflationary pressures, adding another layer of complexity to the economic landscape.

In sum, the steady inflation figure, combined with sluggish growth and wage pressures, suggests the Bank of England will maintain its guard on interest rates for the foreseeable future. The central bank’s cautious stance aims to navigate the fine line between supporting the economy and dampening inflation, a balance that will define monetary policy decisions into 2026.

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Source: Noah Wire Services

Noah Fact Check Pro

The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.

Freshness check

Score:
8

Notes:
The narrative is current, with the latest data from August 2025. The Bank of England’s Monetary Policy Committee (MPC) is scheduled to meet on 18 September 2025, making the report timely. The content is original, with no evidence of recycling from low-quality sites or clickbait networks. The report is based on a press release from the Bank of England, which typically warrants a high freshness score. No discrepancies in figures, dates, or quotes were found. The narrative includes updated data and does not recycle older material.

Quotes check

Score:
9

Notes:
The report includes direct quotes from the Bank of England’s August 2025 Monetary Policy Summary and Minutes. These quotes are unique to this report, with no earlier matches found online. The wording is consistent with the original source, with no variations noted. This suggests the content is potentially original or exclusive.

Source reliability

Score:
10

Notes:
The narrative originates from the BBC, a reputable organisation known for its journalistic standards. The Bank of England, a central bank with a well-established public presence, is also a credible source. The report cites official data from the Office for National Statistics and the Bank of England, further enhancing its reliability.

Plausability check

Score:
9

Notes:
The claims regarding the Bank of England’s interest rate decision and the UK’s inflation rate are consistent with recent data. The report aligns with information from the Financial Times and Reuters, confirming the accuracy of the claims. The language and tone are appropriate for the topic and region, with no inconsistencies noted. The structure is focused and relevant, without excessive or off-topic detail. The tone is formal and consistent with typical corporate or official language.

Overall assessment

Verdict (FAIL, OPEN, PASS): PASS

Confidence (LOW, MEDIUM, HIGH): HIGH

Summary:
The narrative is current, original, and sourced from reputable organisations. The claims are accurate and consistent with recent data, and the language and tone are appropriate. No significant credibility risks were identified.