The Bank of England Will Keep Interest Rates Unchanged Today

[Ben Graham]

The British pound recovered slightly yesterday in anticipation that the Bank of England will most likely keep interest rates unchanged today — a rather controversial decision that would end a series of quarterly cuts.

Markets and economists expect the U.K. central bank to maintain its key rate at 4%, slowing the gradual quarterly reduction that has been in place since August 2024. A press conference led by Governor Andrew Bailey will follow the decision.

The decision to keep rates steady reflects a balanced assessment of the current economic situation. On the one hand, inflation has shown some signs of easing; on the other, there are ongoing concerns about the pace of economic growth. A rate cut could stimulate economic activity, but it would also risk accelerating inflation, undermining the progress achieved so far.

Particular attention will be paid to the tone of Andrew Bailey's statements during the press conference. Traders are expecting signals about the Bank of England's future monetary policy plans. It will be crucial to understand whether the regulator is considering resuming rate cuts in the coming quarters or prioritizing price stability — even at the cost of slower economic growth. Bailey's responses to journalists' questions could have a significant impact on the pound sterling's exchange rate and overall market sentiment.

It is clear that the Monetary Policy Committee (MPC) intends to take a cautious stance, given persistent concerns over the Labour government's autumn budget, which will be presented on November 26. However, Bailey may still hold out hope for a decision before Christmas, as recent data show signs of easing price pressures and slowing economic activity.

As part of a communication overhaul, the Bank of England will also release an updated Monetary Policy Report and minutes, in which the nine MPC members will, for the first time, present their individual viewpoints.

Economists expect a close decision, with the most common forecast being a 6–3 split. The committee is divided between "hawks," including Chief Economist Huw Pill, who remain concerned about persistently high inflation — nearly twice the 2% target — and "doves," such as Alan Taylor, who focus more on slowing economic growth and weak labor demand.

Bailey could play a decisive role in November or December by taking a more balanced stance. Although the governor recently stated that the timing of the next cut remains uncertain, he warned that the economy is not operating at full capacity and pointed to a slowdown in the labor market.

Most economists expect the Bank of England to lower its inflation forecast in the near future after September's price growth remained at 3.8%. Previously, the central bank had projected inflation to peak at 4% this month. Half of economists also expect the bank to raise its 2025 growth forecast following the upward revision of data late last year.

Technical Outlook for GBP/USD

Pound buyers need to overcome the nearest resistance at 1.3075. Only then will it be possible to target 1.3100, though breaking above that level could prove challenging. The farthest upward target is the 1.3130 level.

If the pair declines, bears will attempt to regain control at 1.3040. Should they succeed, a break below that range would deal a serious blow to bullish positions and push GBP/USD toward the 1.3010 low, with the potential to reach 1.2975.

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