The Bank of England voted by the narrowest of majorities to maintain borrowing costs at 4%, the first pause since August 2024 and denying the Chancellor a pre-Budget boost.

However, four of the nine members of the Monetary Policy Committee wanted to reduce Bank Rate by 0.25 percentage points, to 3.75% and there were hints from governor Andrew Bailey of a cut next month.

The vote tipped in favour of no change was influenced by stubborn Inflation, which at 3.8% is almost twice the Bank’s 2% target, though the committee judged it to have peaked.

It said progress in bringing down inflation is being made via an easing of pay growth and services price inflation, but also by subdued economic growth and slack in the labour market.

The five committee members who voted for no change were Governor Andrew Bailey, Megan Greene, Clare Lombardelli, Catherine L Mann and Huw Pill. The four members who called for a cut were Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor.

Mr Bailey said: “Rather than cutting Bank Rate now, I would prefer to wait and see if the durability in disinflation is confirmed in upcoming economic developments this year.”

His comments appeared to signal that the central bank could lower borrowing costs at its next meeting on 18 December.

By then it will have received more information on inflation and the labour market and gained clarity on tax and spending changes at the budget on 26 November. 

Alpesh Paleja, deputy chief economist at the CBI said:  “The hold is understandable: the Committee wants to wait out the Autumn peak in inflation and see if households’ inflation expectations ease from still-high levels.

“The Bank will also be waiting for clarity from the Autumn Budget, its impact on the growth and inflation outlook, and how pay settlements for next year are shaping up.

“Beyond today, though, the case for further cuts is strengthening. Economic momentum remains sluggish, as reflected in the CBI’s business surveys, and the MPC seem to be more reassured about the risks from greater inflation persistence. As a result, a couple more rate cuts in the coming months look likely.”

Nigel Green, CEO of financial adviser deVere, said: “September’s lower-than-expected inflation, softer wage growth, and clear signs of slowing activity in the third quarter have strengthened the case for the Bank of England to move towards cutting interest rates in December.

“The data tell a consistent story — inflation has peaked, and real economic activity is starting to feel the strain of higher borrowing costs.

“If the Bank waits too long, it risks pushing the economy into a deeper slowdown just as fiscal policy is being readjusted.”