The Bank of England opted to hold rates at 4%, signaling patience ahead of the government’s upcoming budget and clearer evidence of disinflation. Policymakers want to see how fiscal measures, particularly expected tax rises, will affect growth and prices before committing to cuts. Still, the tone was notably dovish: the guidance now points to rates moving “gradually downward,” indicating that the first reduction could come as soon as December if inflation continues easing.
For retail investors, this suggests a shifting landscape.Savings rates may soon fall, while lower borrowing costs could support equities and housing. However, the cost-of-living squeeze remains real, with wage growth softening and disposable incomes under strain.
The Bank will weigh this against falling energy prices and slowing demand. Sustained progress toward its 2% inflation target, combined with fiscal clarity from the budget, will determine when rate cuts finally begin.