Interest rates live: Rate cut decision ‘divides’ Bank of England before Budget

One industry expert at AJ Bell suggests the BoE is likely to stay true to form and hang fire until December for a rate cut, in line with its “reactive rather than proactive” history.

“Could there be fireworks a day late at the Bank of England? The interest rate decision is hard to call ahead of today’s vote, with several observers expecting a rate cut even if the market is pricing in no change,” said investment director Russ Mould.

“Recent signs of easing inflation and a softer labour market would give the Bank some cover for a cut and the downbeat tone to Chancellor Rachel Reeves’ speech this week may encourage Governor Andrew Bailey and his colleagues to act ahead of the Budget later this month.

“It all boils down to whether the Bank feels it needs to get one step ahead of any Budget-related economic setback. The central bank has form in being reactive rather than proactive, so the likely outcome still seems to be that it waits until December before making the next move.”

The base rate – currently at 4.0 per cent following cuts three times this year – impacts consumers and taxpayers through everything from their mortgages to savings, so what do experts foresee both this week and beyond?

While inflation is unquestionably still an issue here, running at 3.8 per cent, the defining factors for the voters will include specific segments of inflation, how fast it is coming down (disinflation) and so on.

That’s where the split in votes come, when the MPC members see different areas as more important, recent trends as more notable (or not) and of course, what they think comes next.

“Inflation has almost certainly peaked. Food inflation – a critical concern at the Bank of England this summer – fell back in September and is now running half a percentage point below official forecasts,” explained ING UK economist James Smith.

“This all comes at a time when the Bank is visibly divided on how problematic inflation really is.”

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While those people due to renew their mortgage soon will be hoping for rate cuts which in turn prompt lenders to reduce their own interest rates, for savers it’s a different matter.

Kate Steere, money expert at the personal finance site Finder, believes a rate cut today would mean bad news for savers across the rest of the year.

“If there is a base rate cut today, the Bank of England will essentially be giving banks a carte blanche to further slash savings rates.

“Even holding the base rate at the last meeting didn’t stop providers from reducing their rates, with 9 major banks and building societies dropping rates in October and November.

“With households already facing uncertainty ahead of the Autumn Budget, a rate cut now would be a blow to savers. They’ve done the right thing by putting money away, yet they risk being punished with shrinking returns at a time when every pound counts.”

Inflation and interest rates are eternally linked in our economies.

They are complex topics and naturally there is way more to it, but in a nutshell:

The BoE uses interest rates to try and control inflation. Higher rates discourage businesses from investing in projects and hiring as many people, which in turn leads to less money in the economy, lower spending from people and therefore less opportunity to raise prices (which is basically what inflation is).

Therefore higher rates can help bring down inflation toward a government-set 2 per cent target. Currently we’re at 3.8 per cent inflation.

For an introductory explainer on how one impacts the other and how that affects you, with savings and mortgage repayments and the like, you can check this article out.

Looking at a wider lens, this shows interest rates all the way back to 2003.

It’s been a bit of a rollercoaster at times but after hitting 5.75 per cent pre global financial crisis, there was a long period of basically zero interest rates.

Not many expect a return to those days, even once inflation is tamed and if/when geopolitical situations return to more or less stability.

Here’s a view of what we’ve had so far in interest rates over the past few years, from the start of 2021 onwards.

The cost of living crisis and rapid rise of inflation across 2022 and 2023 saw interest rates rise quickly to try and stem the tide of that inflation, and though there were 14 raises in total across that period, the BoE did come in for criticism for not doing enough, or not doing it fast enough.

Rates peaked at 5.25 per cent and stayed there for a full year, before the rate-cutting cycle started in August 2024.

Five cuts later we’re down to 4 per cent, but inflation has stayed higher for longer than expected so the cuts haven’t come as quick as some would have wanted – such as businesses, homeowners and the government, as lower rates tend to see productivity upticks.

If we do see a cut today, it will be the fourth one of the year and the sixth overall in this rate-cutting cycle, which started back in August 2024.

The MPC has largely held a “once per quarter” approach to cuts, with 25 basis points knocked off each time in February, May and August so far this year.

If a fourth cut arrives – either today or in December – it will be the first time since 2008 that five rate cuts in the same year have been announced.

OK let’s lay out the basics so you know for later on.

Who: Interest rates are the domain of the Bank of England – specifically, the Monetary Policy Committee (MPC) members. There are nine of them and they vote on rate changes.

When: Today at noon. The next one is December 18, then there’s not another until February 2026.

What: The current base rate (what we call ‘the interest rate’) is 4%. The MPC members will vote on whether to keep it the same, raise it or cut it. Usually cuts/raises will be by 0.25% (called 25 basis points) but it’s far from unheard of to be double that or other figures when necessary.