MPC keeps Bank Rate unchanged, balance sheet reduction on track
- Committee votes 7–2 to maintain Bank Rate at 4.00% - Easing pay growth still seen as a risk to inflation persistence - MPC opts for GBP 70bn gilt stock reduction over next 12 months - Forward guidance unchanged, one more cut seen this year
LONDON - The Bank of England delivered no surprises on Thursday, holding rates steady while stressing vigilance against persistent price pressures.
The Monetary Policy Committee (MPC) voted 7–2 to keep Bank Rate at 4.00%. Swati Dhingra and Alan Taylor dissented in favour of a 25bp cut to 3.75%.
Explaining its decision, the committee said it remained focused on ensuring that lingering inflationary pressures do not become entrenched. While wage growth remains elevated, the bank noted that it has begun to ease and is expected to slow more sharply through the end of the year.
On activity, the MPC judged that UK GDP growth remains subdued, consistent with gradual loosening in the labour market and a degree of slack emerging in the economy.
Paul Dales, chief UK economist at Capital Economics, said the key takeaway was the committee’s concern that the recent rise in inflation could feed back into wages and price-setting. “More clearly, with only two MPC members voting to immediately cut rates compared to three the last time in June, the appetite for rapid easing has waned.”
Balance sheet reduction
The MPC also voted 7–2 to reduce the stock of UK government bond holdings for monetary policy purposes by GBP 70bn over the 12 months from October to September 2026. Catherine Mann preferred a slower GBP 62bn reduction, while Huw Pill argued for a faster GBP 100bn pace.
The BoE referenced the August Market Participants Survey, which showed expectations for a slower pace of reduction relative to the previous year. “In recent months, the largest cluster of responses had remained in the GBP 70–85bn range, although the median expectation was for a GBP 65bn reduction,” it said.
Cautious forward guidance
Deutsche Bank’s Sanjay Raja noted that policymakers left forward guidance unchanged, retaining “gradual and careful” language.
“Our call remains one more rate cut in Q4-25 and two further cuts in 2026,” he said. “We continue to think Bank Rate will settle closer to 3.25% ahead of next summer, though we see upside risks to our terminal rate projection.”
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- Committee votes 7–2 to maintain Bank Rate at 4.00%
- Easing pay growth still seen as a risk to inflation persistence
- MPC opts for GBP 70bn gilt stock reduction over next 12 months
- Forward guidance unchanged, one more cut seen this year
By Harry Daniels
LiveSquawk News
@HarryDaniels71
18 September 2025 | 15:00 GMT
LONDON - The Bank of England delivered no surprises on Thursday, holding rates steady while stressing vigilance against persistent price pressures.
The Monetary Policy Committee (MPC) voted 7–2 to keep Bank Rate at 4.00%. Swati Dhingra and Alan Taylor dissented in favour of a 25bp cut to 3.75%.
Explaining its decision, the committee said it remained focused on ensuring that lingering inflationary pressures do not become entrenched. While wage growth remains elevated, the bank noted that it has begun to ease and is expected to slow more sharply through the end of the year.
On activity, the MPC judged that UK GDP growth remains subdued, consistent with gradual loosening in the labour market and a degree of slack emerging in the economy.
Paul Dales, chief UK economist at Capital Economics, said the key takeaway was the committee’s concern that the recent rise in inflation could feed back into wages and price-setting. “More clearly, with only two MPC members voting to immediately cut rates compared to three the last time in June, the appetite for rapid easing has waned.”
The MPC also voted 7–2 to reduce the stock of UK government bond holdings for monetary policy purposes by GBP 70bn over the 12 months from October to September 2026. Catherine Mann preferred a slower GBP 62bn reduction, while Huw Pill argued for a faster GBP 100bn pace.
The BoE referenced the August Market Participants Survey, which showed expectations for a slower pace of reduction relative to the previous year. “In recent months, the largest cluster of responses had remained in the GBP 70–85bn range, although the median expectation was for a GBP 65bn reduction,” it said.
Deutsche Bank’s Sanjay Raja noted that policymakers left forward guidance unchanged, retaining “gradual and careful” language.
“Our call remains one more rate cut in Q4-25 and two further cuts in 2026,” he said. “We continue to think Bank Rate will settle closer to 3.25% ahead of next summer, though we see upside risks to our terminal rate projection.”