Interest rates LIVE: Bank of England holds at 4% in another hammer blow to Reeves

The Bank of England has maintained interest rates at 4% despite policymakers stating they believe inflation has "peaked".

In a tight vote, the central bank's Monetary Policy Committee (MPC) opted to keep the rate the same for the second consecutive time in its final meeting before the autumn Budget. Members of the nine-strong committee voted five to four in favour of maintaining the rate, which is used to dictate mortgage rates and other borrowing costs, but pointed to a "gradual" easing of rates in the longer term.

The Bank suggested that inflation peaked in September at 3.8% and is expected to drop over the coming months before settling at the 2% target rate in 2027. It had previously been predicted that inflation would peak at 4%. Andrew Bailey, governor of the Bank of England, said: "Today we held interest rates at 4%. Since August last year, we have been able to cut rates five times. Inflation has come down a long way from its peak three years ago, but it remains too high." He added: "In our decision to hold interest rates today, we have balanced the risk that above-target inflation becomes more persistent against the risk that demand in the economy is weakening, which might cause inflation to fall too low. If inflation stays on track, we expect to be able to gradually cut rates further."

Alex Race, chartered financial planner at Rathbones, said the last interest rate decision before the Budget "offered no reprieve for the Chancellor, who may have been hoping for a cut to ease the fiscal conundrum".

He said: "Lower borrowing costs could help boost consumer spending and encourage the business investment needed to support much-needed economic growth. If, as in September, inflation cools more quickly than anticipated, the Monetary Policy Committee could sneak in a rate cut before Christmas - but that remains a big if.

"For households, this continued pause is unlikely to trigger a dramatic shift in the mortgage market, while savings rates appear to be on a downward trajectory."

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