The Bank of England (BoE) has opted to hold interest rates at their current level of 4%.

This follows the 0.25% reduction to the base rate in August, the fifth cut by the central bank since it started the cycle of bringing interest rates down from a peak of 5.25% in August 2024.

At its meeting this week, the nine members on the BoE’s Monetary Policy Committee (MPC) voted by a majority of seven to two to maintain the base rate at 4%. Two members were in favour of a further 0.25% cut which would have taken rates to 3.75%.

The BoE’s decision to maintain interest rates follows yesterday’s announcement from the Office for National Statistics that inflation remained at 3.8% in the year to August, unchanged from its level in July.

In its latest report released today, the MPC suggested that inflation was expected to “increase slightly in September”, before falling towards its 2% target after.

"The committee remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process," the MPC said. "Pay growth remains elevated but has fallen and is expected to slow significantly over the rest of the year."

Head of investment at AJ Bell, Laith Khalaf, said that the decision to hold the base rate comes as a surprise to no one.

He concluded: "It’s significant that two members of the rate-setting committee wanted to reduce base rate to 3.75%, which perhaps provides some crumbs of comfort for those who want the Bank to loosen its stance on monetary policy.

"There is now just one more interest rate decision before the November Budget, and Rachel Reeves would dearly love to see some more dovish vibes coming from the Bank of England to relieve some pressure on the public finances.

"The exchange of letters between the governor and the chancellor today is all pretty perfunctory, though Rachel Reeves does say that she and the prime minister have asked government departments to look at what can be done to lower consumer prices ahead of the Budget. Whether anything comes of that remains to be seen, but tax rises rather than inflation controls will almost certainly be the main thrust of the Budget in November, like it or not."

The next base rate announcement is set to take place on 6 November.

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