No change to the base rate in the latest review, as inflation remains above its target level.
The Bank of England has confirmed it has held the base rate at 3.75% in today’s review.
The decision was widely expected, reflecting a cautious approach as inflation remains above the Bank’s long-term target.
Why did the Bank hold rates?
Inflation rose from 3.2% to 3.4% in December – higher than many economists had anticipated and still some way above the Bank’s 2% target. As a result, policymakers opted to pause further rate cuts for the time being.
The vote was notably close, with a 5–4 split. Four members of the Bank’s Monetary Policy Committee (MPC) voted in favour of an immediate reduction of 0.25%, which would have taken the base rate down to 3.5%. This narrower margin highlights that the conversation is shifting and that further cuts are being considered.
Signs of progress on inflation
Despite the recent uptick, the Bank expects inflation to reach the 2% target from April, helped by lower energy prices.
Concerns around persistent inflation have become less pronounced, while risks linked to weaker demand and a cooling labour market are becoming more evident. Wage growth is slowing, and employment conditions are more challenging, both of which typically reduce inflationary pressure.
What happens next?
Since August 2024, the base rate has been cut six times. The Bank has made it clear that further rate cuts are likely, but decisions will be finely balanced and driven by how inflation evolves over the coming months.
Market expectations currently point towards spring as the most likely window for the next reduction. There is also growing anticipation that one or two additional cuts could follow later in the year, potentially bringing the base rate closer to 3% over time.
What this means for homeowners
While today’s hold may be frustrating for some, we hope borrowing costs will be lower in the months ahead.
If you’re considering a mortgage or you’re due to remortgage, now is a good time to review your options and plan ahead. We’re here to help. Call MB Associates on 020 8652 5240