Bank of England Diverges From Fed With Rate Hold

Core Points - The Bank of England has maintained its key interest rate at 4%, breaking a pattern of quarterly rate cuts that began in August 2024 [2][3] - Inflation in the U.K. has increased to an annual rate of 3.8% for three consecutive months through September, up from 2.6% in March, primarily driven by government policy rather than consumer demand [5][6] - The decision to keep rates unchanged was made after a tight vote within the Monetary Policy Committee, reflecting differing views on inflation and the cooling jobs market [4][6] Economic Context - Other European central banks have also kept their key rates unchanged, but the Bank of England indicated that further cuts are likely in the coming months if inflation trends towards the 2% target [3] - The recent rise in inflation in the U.K. mirrors trends seen in the U.S., where inflation has also increased due to factors like higher tariffs [5][6] - The cooling jobs market in the U.K. suggests that inflation may ease by 2026, despite the current acceleration in prices [5]