Bank of England holds interest rates at 4.75%

The Bank of England (BoE) has announced its decision to maintain the base interest rate at 4.75% for the second consecutive month. This decision follows a backdrop of rising inflation and accelerating wage growth, as the UK grapples with ongoing economic challenges.

The Monetary Policy Committee (MPC) reached the decision with a 6–3 majority. While six members voted to hold the rate steady, three advocated for a reduction of 0.25 percentage points, which would have lowered the rate to 4.5%.

The BoE’s decision comes as inflation rose for the second consecutive month in November, signalling persistent price pressures in the economy. Wage growth has also picked up, complicating the path forward for policymakers.

Mike Randall, CEO of Simply Asset Finance, commented on the decision, acknowledging the mixed reactions it might generate among businesses.

“Holding the base rate may not have been the outcome many businesses had anticipated,” Randall said. “However, it does offer a degree of stability, giving businesses the clarity to revisit strategic investment plans while planning ahead for upcoming challenges like rising National Insurance rates and increases in the living wage.”

Randall emphasised the importance of focusing on growth and unlocking economic demand as the country moves into 2025. He called for “bold, decisive action” from the Government, urging closer collaboration between policymakers, financial providers, and the business community to ensure funding is directed where it is needed most.

Neil Rudge, Chief Banking Officer, Commercial, at Shawbrook said: “In its final decision of the year, the Bank of England chose to hold the base rate steady in contrast to their counterparts in the Eurozone.

“This decision may frustrate business leaders, who are seeking positive signals after the challenges posed by October’s Budget and last month’s contraction in the economy.

“Borrowing costs remain tight due to previous hikes still affecting existing loans and economic recovery is projected to be slower than before, but there is some optimism of rate cuts next year and that SMEs could benefit from reduced borrowing costs, giving them the opportunity to accelerate their growth plans. Despite the hurdles, business leaders have consistently shown remarkable resilience and adaptability. They will continue to find practical solutions to the challenges they face,” he added.

The Bank of England has set the date for its next base rate decision on 6 February 2025.