The BoE held its Bank Rate steady at 4.00% today, as expected, but the 5–4 vote split revealed persistent pressure within the Monetary Policy Committee to continue easing. Governor Andrew Bailey and four others — Megan Greene, Clare Lombardelli, Catherine Mann, and Huw Pill — voted to maintain the current rate. Sarah Breeden, Swati Dhingra, Dave Ramsden, and Alan Taylor backed a 25bps cut. The close decision underscores a deeply divided committee as policymakers weigh the trade-off between disinflation progress and weakening demand.
In its accompanying statement, the BoE acknowledged that headline CPI inflation has peaked, while “progress on underlying disinflation continues.” The Bank noted that the risk of persistent inflation has diminished, while the threat from weaker demand has become more evident — marking a clear shift toward a more balanced risk assessment.
Updated projections painted a mixed picture. The BoE now expects GDP growth of 1.4% in Q4 2025 (down slightly from 1.5%) and the same pace in 2026, before picking up modestly to 1.7% in 2027 and 1.8% in 2028. .
On inflation, the outlook remains largely unchanged: CPI is projected at 3.5% in Q4 2025, easing to 2.5% in 2026 and 2.0% by 2027, with a slight uptick to 2.1% in 2028. The forecasts imply the BoE expects inflation to remain anchored near target in the medium term, providing scope for gradual easing once confidence in disinflation deepens.
Market-implied rates show investors expect the Bank Rate to drift lower toward 3.9% by the end of the year, 3.5% through 2026–27, and 3.6% by 2028.
