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Bank of England Holds Rates at 5.25%, Cautious About Future Hikes

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  Published in House and Home on Sunday, December 14th 2025 at 21:39 GMT by London Evening Standard

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UK Finance, the Bank of England, and the Road Ahead – A Comprehensive Summary

The Standard’s latest business‑money story, published on 28 November 2024, provides a detailed look at the Bank of England’s most recent policy meeting and the wider economic context in which the central bank is operating. The piece offers readers a clear, balanced view of why the Bank chose to keep rates unchanged, what that decision signals about future monetary policy, and how the broader financial ecosystem – from banks to the housing market – is reacting.

1. The Bank’s Core Decision

At the heart of the article is the Bank of England’s Monetary Policy Committee (MPC) meeting that concluded on Friday, 23 November. The MPC’s vote was a 8‑1 split, with the sole dissenting voice coming from economist John Harrison, who argued that the economy could afford an additional rate hike. The majority, however, opted to leave the Bank Rate at 5.25 %, the same level it has maintained since the July 2023 meeting.

The article explains that this “no‑change” stance is the Bank’s way of letting new data settle while avoiding a potentially unnecessary tightening that could choke economic growth. The Bank’s inflation gauge – the Consumer Price Index (CPI) – had dipped to 4.4 % in October, just above the 4 % target but still showing a downward trend. The MPC’s decision, therefore, reflects a cautious optimism: the Bank wants to give the economy a chance to absorb the impacts of the last two rate hikes without forcing a premature stop.

2. The Inflation Narrative

A key part of the article is devoted to the Bank’s inflation analysis. The Standard’s author notes that the CPI has been falling steadily since the first quarter of 2024, largely thanks to a decline in energy costs and a softening of food prices. However, the article also highlights that the CPI’s core component – which excludes food and energy – remains stubbornly high at 4.8 %, pointing to persistent supply‑side pressures.

To add depth, the piece links to the Bank’s “Quarterly Inflation Report” (a press release on the Bank of England’s website) and to an independent analysis by UK Finance that argues the core inflation trend may still be “ahead of the curve” due to ongoing supply chain bottlenecks. The Standard article uses these links to illustrate how the Bank and external experts are trying to reconcile the short‑term fall in headline inflation with a potentially more protracted core inflation problem.

3. Market Reaction and Forward Guidance

Following the decision, the article reports on how financial markets have responded. The pound slipped 0.6 % against the euro, reflecting investor unease about the possibility of future rate hikes. Meanwhile, the UK Treasury bonds saw a modest yield increase of 0.12 % to 4.1 % on the 10‑year tenor.

The Bank’s forward guidance is highlighted next. Governor Andrew Bailey’s statement – quoted in the article – emphasises that “the Bank remains committed to its 4 % inflation target” and that the MPC will keep “a close watch on the data.” The article links to Bailey’s full speech on the Bank’s site, which reiterates that the Bank is prepared to raise rates again if inflation moves above target.

4. Banking and Credit Conditions

An important section of the Standard article focuses on the implications for the banking sector. It notes that the Bank of England’s recent “Credit Conditions Survey” shows a mild improvement in credit growth, with non‑bank lenders reporting a 3 % rise in mortgage originations. The article links to UK Finance’s monthly banking survey, where the key takeaway is that banks are maintaining prudent lending standards while still providing access to credit for small‑to‑medium enterprises (SMEs).

The author explains that the decision to hold rates steady is likely to keep the cost of borrowing low enough for businesses to continue expanding. However, the article also warns that the Bank’s “Credit Growth Monitor” – another link to the Bank’s website – will keep a close eye on any signs of credit bubbles forming in the housing market.

5. The Wider Economic Landscape

Finally, the article puts the Bank’s decision into a broader economic frame. It cites UK Finance’s quarterly report, which shows that the manufacturing sector is recovering slowly, with output up by 1.5 % in October. Services activity remains robust, but retail sales have stalled at a 1‑year low. The Standard piece balances this by noting that the UK’s GDP growth forecast for 2025 has been revised down to 1.1 % from the previous estimate of 1.4 %.

A particularly interesting point is the article’s mention of the “Brexit‑2025‑Impact Study” – a research paper hosted on the UK Finance website – which argues that the UK’s trade terms with the EU could tighten further if the Bank’s policy becomes more restrictive. The author therefore underscores that the Bank of England’s decisions will not only affect domestic consumption and investment but could also reverberate across the UK’s trading relationship with its biggest partner.

6. Takeaway for Investors and Consumers

The Standard’s article concludes with a clear, actionable takeaway for its readers. For investors, the main message is that the risk premium on UK equities remains modest, but that investors should remain vigilant for any changes in the Bank’s forward guidance. For consumers, the takeaway is that while the cost of borrowing is likely to stay stable for the near term, household debt levels have climbed to 70 % of disposable income, which could pose a risk if rates rise later in the year.

In sum, the article provides a comprehensive, up‑to‑date snapshot of the Bank of England’s latest policy decision, the inflation environment, market reactions, and the broader economic implications – all while linking to the Bank’s own releases and to independent analyses from UK Finance. Its balanced tone and thorough referencing make it a valuable resource for anyone looking to understand how central‑bank policy, inflation dynamics, and market forces intersect in the UK’s current economic landscape.