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Bank of England leaving rates on hold feels "somewhat perverse"

ended 18. September 2025

INTEREST rates were left on hold today by the Bank of England as widely anticipated. While some business owners said it was the correct decision, others said companies urgently need stimulus, “not policymakers hiding behind data models”.

One said “interest rate policy misses the mark and that ”direct action is needed to tackle the real drivers of inflation.” One described the decision as “perverse” given the state of the economy and weak business confidence.

At its meeting ending on 17 September 2025, the Monetary Policy Committee voted by a majority of 7–2 to maintain Bank Rate at 4%. Two members voted to reduce Bank Rate by 0.25 percentage points, to 3.75%.

The Committee voted by a majority of 7–2 to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £70 billion over the next 12 months, to a total of £488 billion.

Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning Ltd, said “a rate hold at 4% keeps Britain stuck between a rock and a hard place.”

He added: "Inflation is still biting at nearly double the target, growth is going nowhere, households feel squeezed and businesses see no relief on borrowing costs. That toxic mix means people spend less and firms invest less, a drag on growth at exactly the time Britain needs momentum.

“It often feels as though policymakers are looking at spreadsheets, not shop floors. Unless this changes, 2025 risks being another year of stagnation.”

Steve Witt, Co-founder at Not Just Travel, commented: "As widely expected, the Bank of England's hand on the tiller remained firm. With inflation proving stubborn, Threadneedle Street is in a difficult position. Its mandate is to ensure inflation is as close to the 2% target as possible and keeping rates higher for longer is seen as one way to keep it in check.

“What we do know is that Labour's first 14 or so months in government have been marked by economic headwinds, many self-inflicted through fiscal policy, and business confidence has been hit.”

Colin Crooks MBE, CEO at business consultancy, Intentionality, said interest rate policy is a blunt tool that does not tackle the key drivers of inflation: "The Bank of England holding rates was predictable with inflation stuck at 3.8%. However, the importance given to interest rate policy misses the mark.

"In truth, interest rates are a blunt instrument that barely dent inflation driven by structural issues and don't have the broad economic impact policymakers assume. Where direct action is needed is tackling the real drivers of inflation.

“To this end, we need the government to decouple energy prices from volatile gas markets and invest seriously in domestic food production. These targeted measures would tackle cost-of-living pressures at source, rather than hoping monetary policy will magically fix supply-side problems.”

Scott Gallacher, Director at Leicester-based Rowley Turton, agreed: “The danger is that the medicine ends up killing the patient. The modern economic playbook says you raise interest rates to tame inflation, but that’s a blunt tool that overlooks the real causes of UK inflation — energy, food, and supply shocks, not runaway domestic spending.

"That makes today’s decision to hold rates, when the economy is flatlining and businesses need a boost, feel somewhat perverse.

"At some point, the Bank has to accept you can’t cure imported inflation by strangling growth at home. Right now, it’s hard to be optimistic about UK plc.”

For Patricia McGirr, Founder at Burnley-based Repossession Rescue Network,  the economyneeds stimulus, not spreadsheets: "Small firms need stimulus, not policymakers hiding behind data models. In leaving rates on hold, the Bank of England, much like the economy, has shown it is stuck in neutral.

“The Bank may think it’s buying time, but many business owners are running out of it. The rest of 2025 won’t be about growth, it will be about survival and the hope of better things to come.”

Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said the Government's policies have “contributed to economic stagnation and persistent inflation, leaving the Bank of England facing a genuine policy dilemma”.

He added: "Holding rates steady strikes a reasonable balance under current conditions, but weak consumer spending and cautious business investment offer little hope for improvement ahead.

“A significant disconnect persists between the macroeconomic data driving policy decisions and the daily challenges confronting businesses on the ground. And with Storm Reeves due to hit UK landfall in November, the immediate outlook is grim.”

On balance, Rob Mansfield, Independent Financial Advisor at Tonbridge-based Rootes Wealth Management, said the hold was the right decision: "This was probably the right decision but equally it really won't please anyone. There are calls to cut interest rates to stimulate the economy but that would be a sticking plaster at best.

“Businesses need a reason to take risks and the chance of a reward but the approach from government is to constrain and make things less attractive, which means we're stuck in first gear. A sensible, logical budget in November is badly needed as current uncertainty is crippling confidence."

Meanwhile, Rohit Kohli, Director at Romsey-based The Mortgage Stop, said the decision was the right one: "The hold decision was inevitable and, frankly, correct. But the real failure is fiscal. The government talks growth while delivering delay and mixed signals.

"Kicking the Budget into late November tells businesses there’s no plan. We need planning and housing reform, stable investment incentives and tax certainty; instead we’ve had costly policy missteps and U-turns.

“If the Autumn, or rather Winter Statement isn’t pro-growth, we’ll risk seeing consolidation, weaker investment and arrears creeping up.”

10 responses from the Newspage community

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Steve Witt
Co-founder at Not Just Travel
As widely expected, the Bank of England's hand on the tiller remained firm. With inflation proving stubborn, Threadneedle Street is in a difficult position. Its mandate is to ensure inflation is as close to the 2% target as possible and keeping rates higher for longer is seen as one way to keep it in check. What we do know is that Labour's first 14 or so months in government have been marked by economic headwinds, many self-inflicted through fiscal policy, and business confidence has been hit. As for consumers, they continue to spend, for now at least. People are spending more on holidays, with the average booking value per holiday up 10% this year, suggesting that there is cash in the economy despite rising living costs. A hold seems like the right decision in the current economic climate.
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Tony Redondo
Founder at Cosmos Currency Exchange
Regardless of their rhetoric, this government's actions demonstrate that businesses are viewed primarily as cash cows to fund its pet projects. This approach has contributed to economic stagnation and persistent inflation, leaving the Bank of England facing a genuine policy dilemma. Holding rates steady strikes a reasonable balance under current conditions, but weak consumer spending and cautious business investment offer little hope for improvement ahead. A significant disconnect persists between the macroeconomic data driving policy decisions and the daily challenges confronting businesses on the ground. The one-size-fits-all nature of monetary policy inevitably creates disproportionate impacts across different sectors and business sizes. And with Storm Reeves due to hit UK landfall in November, the immediate outlook is grim.
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Colin Crooks MBE HonDsc
CEO at Intentionality
The Bank of England holding rates was predictable with inflation stuck at 3.8%. However, the importance given to interest rate policy misses the mark. In truth, interest rates are a blunt instrument that barely dent inflation driven by structural issues and don't have the broad economic impact policymakers assume. Direct action is needed to tackle the real drivers of inflation. To this end, we need the government to decouple energy prices from volatile gas markets and invest seriously in domestic food production. These targeted measures would tackle cost-of-living pressures at source, rather than hoping monetary policy will magically fix supply-side problems. I'd rather see policymakers focus on productive solutions that boost capacity and reduce structural costs, instead of relying on the same old lever that leaves the root causes untouched. The economy needs smart intervention, not blunt tools.
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Patricia McGirr
Founder at Repossession Rescue Network
Small firms need stimulus, not policymakers hiding behind data models. In leaving rates on hold, the Bank of England, much like the economy, has shown it is stuck in neutral. On the ground, wages, rents and energy bills are colliding with fragile consumer confidence. The Bank may think it’s buying time, but many business owners are running out of it. The rest of 2025 won’t be about growth, it will be about survival and the hope of better things to come. Inflation is still double the target and businesses are already paying the price in higher costs, weaker demand and tighter margins. Standing still feels less like prudence and more like paralysis.
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Aaron Strutt
Product and Communications Director at Trinity Financial
Andrew Bailey recently stressed that there is a huge amount of economic uncertainty at the moment and concern in the money markets. While many borrowers want the base rate to come down again, some members of the MPC are not so keen because of the risk to rising inflation. Another base rate cut this year seems quite unlikely unless the MPC sneak one in just before Christmas as we have seen them do before. A couple of base rate reductions next year are more likely but the MPC will think having the base rate at 4% is pretty reasonable. Ideally it would have been closer to 3.5% by now as many anticipated. Mortgage customers want rates to be cheaper but savers are keen for higher rates so they get better returns on their savings. The Federal Reserve cut interest rates in the United States last night so this would have made the MPC's decision to lower the base rate slightly easier.
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Eamonn Prendergast
Chartered Financial Adviser at Palantir Financial Planning Ltd
A rate hold at 4% keeps Britain stuck between a rock and a hard place. Inflation is still biting at nearly double the target, growth is going nowhere, households feel squeezed and businesses see no relief on borrowing costs. That toxic mix means people spend less and firms invest less, a drag on growth at exactly the time Britain needs momentum. For the small businesses I work with, confidence is fragile. Costs keep creeping up while uncertainty around the Budget and future rate cuts makes long-term planning almost impossible. It often feels as though policymakers are looking at spreadsheets, not shop floors. Unless this changes, 2025 risks being another year of stagnation.
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Dariusz Karpowicz
Director at Albion Financial Advice
The Bank's decision to hold rates was hardly shocking. It was the only sensible move given inflation stubbornly sitting at double the 2% target. While businesses desperately need relief from borrowing costs, cutting rates now would risk reigniting price pressures just when we're making progress. Small businesses are caught in a vice of rising costs, squeezed consumers and borrowing that remains painfully expensive. With the autumn Budget looming and little optimism on the horizon, many firms are simply treading water rather than investing for growth. The economy needs genuine stimulus, but not the kind that comes from loosening monetary policy when inflation remains problematic.
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Editor
Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
This was probably the right decision but equally it really won't please anyone. There are calls to cut interest rates to stimulate the economy but that would be a sticking plaster at best. Businesses need a reason to take risks and the chance of a reward but the approach from government is to constrain and make things less attractive, which means we're stuck in first gear. A sensible, logical budget in November is badly needed as current uncertainty is crippling confidence.
Copy

Editor
Scott Gallacher
Director at Rowley Turton
The danger is that the medicine ends up killing the patient. The modern economic playbook says you raise interest rates to tame inflation, but that’s a blunt tool that overlooks the real causes of UK inflation — energy, food, and supply shocks, not runaway domestic spending. That makes today’s decision to hold rates, when the economy is flatlining and businesses need a boost, feel somewhat perverse. And with the US Federal Reserve cutting by 0.25%, UK rates have effectively risen relative to theirs, tightening conditions here even further. At some point, the Bank has to accept you can’t cure imported inflation by strangling growth at home. Right now, it’s hard to be optimistic about UK plc.
Copy

Editor
Rohit Kohli
Director at The Mortgage Stop
The hold decision was inevitable and, frankly, correct. With inflation still around double the 2% target, a cut now would push up swap rates and mortgage pricing. But the real failure is fiscal. The government talks growth while delivering delay and mixed signals. Kicking the Budget into late November tells businesses there’s no plan. We need planning and housing reform, stable investment incentives and tax certainty; instead we’ve had costly policy missteps and U-turns. The Chancellor must own this rather than leaving the Bank to mask weak demand. For 2025 I expect flat activity, driven by remortgages and criteria tweaks - not price cuts. If the Autumn, or rather Winter Statement isn’t pro-growth, we’ll risk seeing consolidation, weaker investment and arrears creeping up.