The Bank of England has held interest rates steady at four per cent in a knife-edge decision that saw Governor Andrew Bailey cast the deciding vote.
A Divided Committee
Policymakers at the Bank were deeply divided, resulting in a 5-4 vote on Friday, 7th November 2025. The Monetary Policy Committee weighed contractions in the jobs market, which could lower inflation, against persistently high inflation expectations of around four per cent among households.
Swati Dhingra and Alan Taylor argued that the bank rate should have already been lower to account for lags in its transmission to the real economy. However, Governor Andrew Bailey struck a more cautious tone.
"Rather than cutting Bank Rate now, I would prefer to wait and see if the durability in disinflation is confirmed in upcoming economic developments this year," Bailey stated.
Market Reaction and Bank Shares
The FTSE 100 initially jumped on the news but ultimately failed to recover, closing the session down 0.42 per cent.
It was a brighter day for bank shares, however, after rumours of a new tax on the sector were reportedly squashed following fierce lobbying. The industry body had warned that London lenders' total tax rate rose 0.6 per cent to 46.4 per cent in 2025, dwarfing the 27.9 per cent rate for rivals in New York.
As a result, Natwest shares closed up 2.11 per cent to 600.83p, while Lloyds gained 1.5 per cent to 90.94p.
Broader Economic Context
The Bank's decision comes amid significant pressure on the UK's economic landscape. Concerns about the City's global competitiveness have spiked due to the high tax burden on financial institutions.
Other major stories from the day included:
- Pub closures reaching a new high as hospitality braces for the Budget
- UK tech founders warning the Chancellor that her Budget could derail London IPO plans
- The construction industry shedding workers at the steepest rate in five years
