London Daily

Focus on the big picture.
Wednesday, Sep 17, 2025

Bank of England hints rates near peak after 10th hike

Bank of England hints rates near peak after 10th hike

The Bank of England signalled the tide was turning in its battle against high inflation after it raised interest rates on Thursday for the 10th meeting in a row, prompting investors to prepare for the end of its run of higher borrowing costs.

The BoE's interest rate setters voted 7-2 to push Bank Rate to 4.0% - its highest since 2008 - from 3.5%. The move had been expected by most investors and economists polled by Reuters.

Like other central banks such as the U.S. Federal Reserve and the European Central Bank, which raised rates on Wednesday and Thursday respectively, the BoE is trying to smother the risks from an inflation rate that is way above its target.

But it is also worried about aggravating what is expected to be the worst recession among big rich economies this year.

It said its rate hikes going back to December 2021 were likely to become an increasing drag on the economy, helping to bring inflation down to about 4% by the end of this year. Previously the BoE had forecast 2023 inflation at around 5%.

"We've seen the first signs that inflation has turned the corner," Governor Andrew Bailey told reporters after the rate hike. "But it's too soon to declare victory just yet, inflationary pressures are still there."

The Monetary Policy Committee (MPC) would need to be "absolutely sure" that inflation was receding, he said.

The MPC said further interest rate hikes would hinge on evidence of more persistent price pressures.

Previously the BoE had said it would "respond forcefully, as necessary" to signs of further inflation pressure, and that "further increases in Bank Rate may be required".

Investors now think the BoE will raise rates once more, to 4.25% in March, and then keep rates steady, in contrast to expectations before the meeting that it would probably raise rates twice more this year to reach 4.5% by June.

Sterling fell sharply against the U.S. dollar while British government bonds chalked up their biggest daily gains since October.

Bailey said labour market data would be key for understanding how quickly inflation falls. Current pay settlements giving average raises of 6% were a concern, but there were signs that they would fall later this year.

Alexander Batten, a bond portfolio manager with Columbia Threadneedle Investments, said recent data suggested that a sharp weakening of the labour market was coming "but we suspect this may not come soon enough to prevent one final 25 basis-point hike in March".

Martin Beck, an economist with forecasters the EY ITEM Club, said the peak in Bank Rate had probably now been reached given the weak outlook for the economy, and rate cuts could occur by the end of the year.

The BoE's announcement came a day after the U.S. Federal Reserve slowed the pace of its rate hikes with a quarter-point move but said it expected further increases would be needed. The European Central Bank raised rates by a half a percentage point on Thursday to 2.5% and signalled at least one more increase.

The BoE was less clear about its intentions. It said inflation would fall from above 10% now to below its 2% target in just over a year's time.

But it also warned that the risk that inflation could overshoot its forecasts was the biggest since the MPC was formed in 1997 because of persistent labour market pressures and higher-than-expected core and domestically generated inflation.

BoE Deputy Governor Ben Broadbent stressed to reporters that while Britain appeared to have turned a corner on inflation, that was not a comment about Bank Rate hitting its peak.


SHALLOWER RECESSION


The BoE said Britain remained set for a recession but it was likely to be "much shallower" than previously feared due mostly to lower energy prices and weaker market interest rate expectations.

The economy was now seen contracting by 0.5% in 2023 compared with the 1.5% shrinkage forecast in November.

Britain's economy was forecast to shrink by 0.1% during the current quarter, starting a recession which would last five quarters - rather than eight forecast in November - and reducing economic output by a modest 1%.

The BoE saw output still shrinking in 2024 and barely growing in 2025.

Finance minister Jeremy Hunt has promised measures to revive growth in a budget on March 15, ahead of a national election expected next year.

Responding to the BoE decision, Hunt said he would ensure budget measures did not delay the fall in inflation.

The International Monetary Fund this week said Britain's economy would shrink by 0.6% this year while all the other Group of Seven nations were likely to grow.

Britain has been hit hard by the energy price surge after Russia's invasion of Ukraine as it relies heavily on gas for power generation.

It has also suffered a fall in the size of its workforce after the pandemic and post-Brexit restrictions on European Union workers. Unlike other countries, that fall in so-called labour market activity has not yet reversed in Britain.

The BoE said Britain's lack of workers, combined with low business investment and weak productivity growth, meant the economy could probably only grow by about 0.7% a year in 2024 and 2025 without generating inflationary heat.

Before the pandemic, the potential growth rate was about 1.7%.

The BoE saw Britain's economy still below its pre-pandemic size until after 2025, representing seven lost years for growth.

Newsletter

Related Articles

0:00
0:00
Close
Charlie Kirk's murder will break the left's hateful cancel tactics
Kash Patel erupts at ‘buffoon’ Sen. Adam Schiff over Russiagate: ‘You are the biggest fraud’
Homeland Security says Emmy speech ‘fanning the flames of hatred’ after Einbinder’s ‘F— ICE’ remark
Charlie Kirk’s Alleged Assassin Tyler Robinson Faces Death Penalty as Charges Formally Announced
Actor, director, environmentalist Robert Redford dies at 89
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
JD Vance Says There Is “No Unity” with Those Who Celebrate Charlie Kirk’s Killing, and he is right!
Trump sues the 'New York Times' for an astronomical sum of 15 billion dollars
Florida Hospital Welcomes Its Largest-Ever Baby: Annan, Nearly Fourteen Pounds at Birth
U.S. and Britain Poised to Finalize Over $10 Billion in High-Tech, Nuclear and Defense Deals During Trump State Visit
China Finds Nvidia Violated Antitrust Laws in Mellanox Deal, Deepens Trade Tensions with US
US Air Force Begins Modifications on Qatar-Donated Jet Amid Plans to Use It as Air Force One
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
Elon Musk Retakes Lead as World’s Richest After Brief Ellison Surge
U.S. and China Agree on Framework to Shift TikTok to American Ownership
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
French Debt Downgrade Piles Pressure on Macron’s New Prime Minister
US and UK Near Tech, Nuclear and Whisky Deals Ahead of Trump Trip
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
Anesthesiologist Left Operation Mid-Surgery to Have Sex with Nurse
Tens of Thousands of Young Chinese Get Up Every Morning and Go to Work Where They Do Nothing
The New Life of Novak Djokovic
The German Owner of Politico Mathias Döpfner Eyes Further U.S. Media Expansion After Axel Springer Restructuring
Suspect Arrested: Utah Man in Custody for Charlie Kirk’s Fatal Shooting
In a politically motivated trial: Bolsonaro Sentenced to 27 Years for Plotting Coup After 2022 Defeat
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Turkish authorities seize leading broadcaster amid fraud and tax investigation
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
ChatGPT CEO signals policy to alert authorities over suicidal youth after teen’s death
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
King Charles and Prince Harry Share First In-Person Moment in 19 Months
Starmer Establishes Economic ‘Budget Board’ to Centralise Policy and Rebuild Business Trust
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
×