The Bank of England kept its key interest rate at 4% on Thursday, November 6, 2025, in a sharply divided 5-4 vote that laid bare deep tensions over how fast to ease monetary policy. The decision, announced at midday UTC from its historic Threadneedle Street headquarters in London, came after a tense meeting that ended Wednesday night — and sent the British pound sliding against the dollar. The Monetary Policy Committee (MPC) is now split down the middle on whether inflation is truly tamed — or just biding its time.
Why the Split? The Battle Within the MPC
Five members — including Governor Andrew Bailey, External Member Megan Greene, Deputy Governor Clare Lombardelli, External Member Catherine L Mann, and Chief Economist Huw Pill — argued that cutting rates too soon risks reigniting inflation. The other four — Deputy Governors Sarah Breeden and Dave Ramsden, plus External Members Swati Dhingra and Alan Taylor — saw weakening labor data and slowing wage growth as signs the economy could handle relief. "We still think rates are on a gradual path downwards," Bailey said during the post-decision press conference at the Bank’s Courtroom, "but we need to be sure that inflation is on track to return to our 2% target before we cut them again."
That caution isn’t just rhetoric. Consumer Price Index (CPI) inflation held steady at 3.8% in September 2025 — unchanged from July, and still nearly double the target. But here’s the twist: the Bank’s own forecast now expects inflation to fall to 2.1% by the end of 2026, down from its August projection of 2.5%. That’s a meaningful shift. So why hold?
The Economy Is Slowly Cracking — But Is It Enough?
The data behind the decision tells a story of quiet distress. Wage growth slipped to 5.7% year-on-year in Q3 2025, the slowest pace since early 2023. Unemployment climbed to 4.3% in September, according to Office for National Statistics figures released October 16. Services inflation, once the stubborn core of price pressures, is now cooling. Pay growth is easing. Firms are hiring less aggressively. The labor market, once the Bank’s biggest worry, is now showing signs of slack.
But the MPC isn’t convinced. "Underlying disinflation is being underpinned by subdued economic growth and building slack in the labour market," the minutes read. In plain terms: the economy is slowing, and that’s helping bring inflation down — not because prices are falling, but because demand is. That’s a dangerous kind of relief. It’s not a cure; it’s a pause.
Market Expectations Are Already Priced In
Wall Street and the City didn’t react with shock. Analysts at Goldman Sachs International, Barclays Capital, and Morgan Stanley had priced in a hold with 65% probability. Even Dr. Samuel Tombs of Pantheon Macroeconomics, who’d predicted a cut, didn’t sound surprised. "The Bank’s being cautious," he told Bloomberg, "and with sterling down 8.2% against the dollar since January, they’re not going to risk making it worse by cutting too early."
The real story is in the forward guidance. The MPC’s minutes explicitly say: "If progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path." That’s a green light — just not yet. The next trigger? The October CPI data, due November 20. If it shows inflation dipping below 3.6%, the December 18 meeting could be the one.
What’s Next? The December Gamble
The final MPC meeting of 2025 is just over a month away. Market pricing, according to the Intercontinental Exchange’s FedWatch Tool, now puts a 72% chance on a 0.25% cut to 3.75%. UBS Group AG economists are even more confident, predicting not just one cut in December, but two more in Q1 2026.
That would mark a dramatic reversal from just six months ago, when the Bank was still warning of "persistent inflation." Now, it’s wrestling with a new problem: too much caution. The economy isn’t overheating — it’s sputtering. And if inflation keeps falling, the MPC may look back on this 5-4 vote as the moment they waited too long.
Why This Matters to You
If you’re a homeowner with a variable-rate mortgage, this hold means your payments stay the same — for now. If you’re saving, you’re still getting decent returns on cash. But if you’re a business owner trying to borrow, or a worker hoping for a raise, the message is clear: the Bank isn’t ready to give you breathing room. And that’s the real cost of this decision: patience. The economy is healing — slowly. But the Bank is betting that rushing could undo it all.
Frequently Asked Questions
Why didn’t the Bank of England cut rates even though inflation is falling?
The MPC is wary of cutting too soon because inflation — while falling — remains nearly double the 2% target. Even with CPI at 3.8%, services and wage pressures could rebound if demand picks up. The Committee wants more proof that disinflation is structural, not just a result of weak growth. A premature cut could force them to raise rates again later — a risk they’re unwilling to take.
Who are the key figures on the MPC and what are their positions?
Governor Andrew Bailey and Chief Economist Huw Pill lead the hold faction, emphasizing caution. External members Swati Dhingra and Alan Taylor, both economists with academic backgrounds, argue the labor market’s weakening justifies easing. Deputy Governor Sarah Breeden, focused on financial stability, fears prolonged high rates could trigger corporate defaults.
How does the pound’s performance affect the MPC’s decision?
The British pound has fallen 8.2% against the US dollar since January 2025, making imports more expensive and pushing up inflation. A rate cut could weaken it further, undermining the Bank’s inflation fight. That’s why even members favoring a cut are hesitant — they don’t want to trigger a currency spiral that reverses their progress on prices.
What data will the MPC watch before the December meeting?
The October CPI report on November 20 is the next major signal. If inflation drops below 3.6%, it’ll confirm the downward trend. The September wage data (released November 12) and the Q3 GDP revision (November 27) will also be scrutinized. The Bank is looking for three consecutive months of declining inflation — something it hasn’t seen since early 2024.
Is a rate cut in December guaranteed?
No. While markets price in a 72% chance, the MPC’s decision will hinge on the November data. If inflation holds or wage growth rebounds, the vote could be 6-3 or even 7-2 against a cut. The Bank has signaled it won’t cut just because markets expect it — only when it’s confident the economy can sustain lower rates without reigniting inflation.
How does this compare to past MPC decisions?
This is the closest vote since 2016, when the MPC split 5-4 on whether to cut after Brexit. Back then, the Bank cut — and inflation surged. The current committee remembers that. They’re also comparing this to the 2020-2022 period, when they held rates too long during the pandemic recovery, forcing a rapid 2023 tightening. This time, they’re determined not to repeat that mistake — even if it means moving slower than the market wants.