Interest rates to stay at 4% but ‘door open’ for post-Budget cut

Interest rates have been kept at 4% following a narrow vote that experts say opens the door to borrowing costs being cut in December.

- SION BARRY

> Bank of England governor Andrew Bailey

The central bank’s Monetary Policy Committee (MPC) opted to keep the rates the same at the final meeting before the autumn Budget. Members of the nine-strong committee voted five to four in favour of maintaining the rate, which is used to dictate mortgage rates and other borrowing costs.

But the closeness of the vote, as well as speculation that possible tax rises in the upcoming Budget could push down on inflation, have increased the likelihood of rates being cut before the end of the year, according to experts.

Yael Selfin, KPMG UK's chief economist, said: “Despite the decision to keep interest rates unchanged, the narrow vote split and the more dovish tone in the minutes suggests the door remains open for a rate cut at the December meeting.

“Key data releases on inflation and the labour market, in addition to more clarity on fiscal policy following the Budget, will likely be enough to persuade a majority of MPC members to vote for a rate cut. We expect base rates to fall to 3.75% by the end of the year.”