BoE Holds Rates at 4% and Slows QT

The Bank of England (BoE) decided to keep its Bank Rate unchanged at 4% in August, voting 7–2 in favor of the move. Two members of the Monetary Policy Committee (MPC) pushed for a 25 basis point cut to 3.75%, but the majority opted for stability.

At the same time, the MPC voted 7–2 to slow the pace of quantitative tightening (QT). The Bank now plans to reduce its gilt holdings by £70 billion over the next year, bringing the total to £488 billion.

Inflation and Growth Outlook

Policymakers stressed that restrictive policy has played a role in lowering inflation, though consumer price growth remains above target.

• CPI stood at 3.8% in August.
• Inflation is expected to rise slightly in September before trending lower.
• Wage growth continues to ease, while services inflation has remained steady.

Balancing Risks

The MPC emphasized that upside risks to inflation persist, particularly in energy and services, but also acknowledged weaknesses across the economy.

• GDP growth has slowed.
• The labor market is loosening, with signs of spare capacity emerging.
• Services activity has stabilized, but business investment remains under pressure.

Policy Approach

The committee underlined that future decisions will be gradual and data-dependent, aiming to balance disinflation progress with economic recovery.

Key signals:

• The BoE is working to ensure inflation continues moving toward the target.
• Policymakers aim to avoid tightening excessively, which could damage growth.