What do you think Bank of England should do today with its base rate decision?

Holding or cutting rates would be welcome news for households and businesses, but it’s hard to see past a rise tomorrow. Inflation is back at 3.5% and price pressures are spreading beyond fuel. The Bank has a difficult balance: jobs and household finances are already under pressure, but letting inflation take hold could mean higher rates for longer. An unpopular decision now may avoid a more painful one later.

The inevitable outcome will be an increase to 4%; the reluctance is centred around the cause, and it isn't frivolous spending in the high street, but external factors linked to overseas wars and the cost of fuel, simply put. The Bank of England have no real alternative tools, increasing the cost of borrowing has always been Plan A, but in today's economy perhaps the MPC need to think beyond the obvious. An increase has already been baked into all mortgage fixed-rate pricing for the last 6 months, so the majority of borrowers will see no change as a result. Mortgages have been self-regulating to a degree. Savers may champion the inevitable decision, but the economists will rightly say this will just slow our real economy further.

The Bank of England should hold at 3.75%, not hike to 4.00%. September’s CPI uptick to 3.5% has pushed a rise to near-certainty, but it’s an overreaction to transient supply shocks and energy volatility, which domestic monetary policy cannot fix. Higher rates won’t cure global supply constraints; they will hammer British businesses and household cash flow while growth is anaemic, and Labour has piled on over £66bn of tax rises since 2024. Policy works with a 12- to 18-month lag, and the full bite of earlier tightening is still feeding through corporate refinancing and fixed-rate mortgage roll-offs. Another 25 basis points risks choking commercial credit, stalling SME investment and deepening the high-street drag. The MPC should look past headline CPI to core inflation and wage stability and weigh tighter credit against supply-led price pressure. It won’t, fearing for its credibility, so the hike looks all but inevitable.

Raise to 4 per cent, and say that this is close to the peak.

Fuel drove September's jump to 3.5 per cent. Motor fuel is up almost 30 per cent on a year ago, but core inflation is 2.8 per cent and private sector pay is growing at 3 per cent. Still, services inflation at 3.7 per cent is the reason to move now.

What the Bank needs to consider is the message. Markets are pricing several more rises, and small firms are planning for them. Many of the online sellers I work with have just paid for Christmas stock on overdrafts and cards, with a Self Assessment bill due on 31 January. Tell them 4 per cent is near the top and they'll still order for spring and hire. Leave them guessing and they'll sit on cash.

A higher-rate taxpayer needs only £12,500 at 4 per cent outside an ISA to use up their £500 savings allowance, unchanged since 2016. From April 2027, interest above that will be taxed at 44 per cent under last week's Budget.