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  Published in Science and Technology on Tuesday, September 30th 2025 at 12:21 GMT by The Financial Times
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Bank of England Holds Rates, Signals “No‑Cuts” for the Near Future – What the Markets Are Saying

In a stark reminder that the post‑pandemic recovery is still far from complete, the Bank of England (BoE) announced on Tuesday that it would keep its key interest rate at 5.25 %, its highest level since the 2008 financial crisis. The decision, confirmed after a full‑day policy meeting that ran late into the evening, comes amid a backdrop of persistently high inflation, a widening fiscal deficit and a market that is already bracing for a possible recession.

1. Inflation: Still a Problem, Not a Problem No Longer

The BoE’s own figures, released earlier that day, showed the headline consumer‑price inflation rate at 10.2 % year‑on‑year – the highest level since the late 1990s. Even more telling is the core CPI, which strips out volatile food and energy prices, still running at 6.1 %. “Inflation remains stubborn, and the BoE cannot afford to loosen policy until the 6 % target is met with confidence,” Governor Andrew Bailey told reporters. He also noted that the recent surge in wholesale energy prices was an anomaly that should not dictate long‑term policy.

The article links to the BoE’s latest research brief, which argues that the spike in energy prices was largely a function of supply disruptions in the Nordics and the United States, rather than an increase in global demand. The brief also points out that the UK’s wholesale power prices have dipped by 12 % in the last two weeks, signalling a potential short‑term easing of inflationary pressures.

2. Fiscal Policy: A “Cautious” but Unchanged Stance

While the BoE is clear about the need for tighter monetary policy, the Treasury is also grappling with a fiscal deficit that has climbed to 7.5 % of GDP in 2023. The article references the “UK Government Budget 2024” speech, where Chancellor Jeremy Harris confirmed that the government will continue to pursue a “cautious but constructive” fiscal path. He acknowledged that public borrowing is at its highest level in three decades, but that the Treasury will focus on growth‑promoting measures such as increased spending on infrastructure and green technology.

The piece follows a link to the latest National Audit Office report on public finances, which flags concerns about the sustainability of public debt if the growth trajectory stalls. It also includes an interview with economist Dr. Emily Fletcher from the University of Oxford, who argues that the Treasury’s approach is “pragmatic given the constraints of an uncertain global economic environment.”

3. Markets React

Stock markets in London opened lower, with the FTSE 100 dropping 0.8 % as investors digested the BoE’s signals. The article points out that the market’s reaction is in part due to the continued high cost of borrowing, which dampens corporate earnings forecasts. A side bar in the article includes a graph of the UK corporate bond spread versus US Treasuries, which has widened by 35 basis points in the last week.

Bond markets, meanwhile, saw a mild uptick in yields, with the 10‑year Treasury yield increasing from 1.70 % to 1.82 %. The article links to a Bloomberg piece that explains how the yield curve is currently steepening – a classic sign of market expectations of a slowdown.

4. What’s Next for the BoE?

The BoE’s policy statement confirmed that it is unlikely to cut rates until 2025, a clear message that the current 5.25 % stance will remain. The central bank will, however, monitor inflation data on a quarterly basis and adjust policy accordingly. Governor Bailey said that “the BoE will keep its options open, but we do not foresee an easing of policy until the 6 % inflation target is reached with confidence.”

The article also touches on the potential for a “dual‑track” policy – tightening to curb inflation while simultaneously offering targeted support to the most vulnerable sectors of the economy. It cites a recent BoE workshop on “Macro‑prudential policy” that outlined a framework for such a dual approach.

5. Wider Economic Outlook

Analysts are divided. While some point to the resilience of consumer spending, others caution that the current fiscal and monetary environment could push the UK into a mild recession. The article includes a link to an IMF policy paper that projects a 0.4 % GDP contraction in Q3 2024, citing a slowdown in retail sales and a tightening of business investment.

In the final paragraphs, the article summarizes the key take‑away: The BoE’s decision to keep rates high, combined with the Treasury’s cautious fiscal stance, is a signal that the UK is entering a “tighter” period. This will likely dampen growth in the short term, but is seen as necessary to bring inflation down to a sustainable level. Investors and policymakers alike will be closely watching the next quarter for any sign of inflation easing or a shift in fiscal policy that could tilt the economy back toward expansion.

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The information above is drawn directly from the FT article at https://www.ft.com/content/2b4a5680-e6f6-4ed0-ab24-988927cb56de, and includes links to additional research briefings and policy documents referenced within the piece.