BOE Holds Rates Steady. Why It Isn’t Following the Fed.

The Bank of England in London. Policymakers on Thursday kept the key interest rate on hold. (Getty Images)

Key Points

About This Summary

• The Bank of England (BOE) held its key interest rate steady at 4%, following five cuts since August 2024.
• Seven of nine Monetary Policy Committee members voted to hold rates, while two members voted for a quarter-point cut.
• The BOE will trim its holdings of gilts by 70 billion pounds over the next 12 months, to a total of 488 billion pounds.

The Bank of England held its key interest rate steady Thursday, just a day after the Federal Reserve cut borrowing costs for the first time since December.

The BOE kept borrowing costs unchanged at 4%, as was widely expected.

Policymakers have lowered rates five times since August 2024, cutting at three-month intervals. At the central bank’s last meeting two rounds of voting were required for the first time since the Monetary Policy Committee was launched 28 years ago, with MPC member Alan Taylor switching his vote to break a deadlock in favor of a quarter-point cut.

This time around, seven of the MPC’s nine members voted to hold rates steady, while two voted to cut borrowing costs by a quarter of a point.

The committee also voted to slow down the pace at which it’s selling U.K. government bonds, or gilts. It plans to trim its holdings of gilts by 70 billion pounds ($95 billion) over the next 12 months, to a total of £488 billion.

The BOE is trying to support the U.K. labor market, with unemployment steady at 4.7%. But inflation is running at 3.8%, way above the central bank’s 2% target.

“So far, we are not seeing enough progress in bringing inflation down to give room for maneuver on rates,” Steve Clayton, head of equity funds at Hargreaves Lansdown, said.

The BOE will be watching employment and growth data closely for now, because it “will worry about choking off growth if interest rates stay too high for too long, but for now, its hands look tied,” he added.

London-listed stocks have had a solid enough year despite those worries. The flagship FTSE 100 is up 13% in 2025, although the mid-cap FTSE 250 is up just 5.1%. The FTSE 250’s members tend to be more reliant on revenue from the U.K., so it’s often seen as a better gauge of the health of the domestic economy than the more internationally focused FTSE 100.

Write to George Glover at george.glover@dowjones.com