Divided Bank of England holds key interest rate at 4% despite hopes inflation has peaked

LONDON (AP) — The Bank of England appeared deeply divided Thursday as it kept its main interest rate unchanged at 4%, with a wafer-thin majority of policymakers needing more information on how swiftly inflation will fall back towards their target before backing another cut in borrowing costs.

The decision by the nine-member rate-setting body to maintain Bank Rate — a benchmark for mortgages as well as consumer and business loans — was widely anticipated, though some economists thought there was a chance that borrowing rates would be reduced by a further quarter of a percentage point to 3.75%.

Like the U.S. Federal Reserve, which last week cut interest rates for the second time this year, the vote among on the bank's Monetary Policy Committee was tight, with five voting for unchanged rates and four backing a cut.

“We still think rates are on a gradual path downwards, but we need to be sure that inflation is on track to return to our 2% target before we cut them again," said Bank Governor Andrew Bailey, who had the deciding vote.

Thursday’s decision was the first time the Bank of England has departed from the quarterly pace of cuts since it started cutting borrowing rates in August 2024 after the unwinding of the previous spike in inflation in the wake of Russia’s invasion of Ukraine.

The main reason why rates were kept on hold is that the annual rate of consumer price inflation is standing at 3.8%, nearly double the bank's target, and the highest level among the Group of Seven leading industrial nations.

In minutes accompanying the decision, the rate-setting panel said inflation has likely “peaked” at a lower level than its previous prediction of 4% in August, when it last cut interest rates to 4%.

With inflation set to fall in coming months and possibly back to the target next year, many economists think a cut is possible at the next rate-setting meeting in December.

“Today’s decision clearly opens the door to a December cut, but that remains contingent on the incoming data," said Matt Swannell, chief economic advisor to the EY ITEM Club.

Much could hinge on the U.K. government's budget on Nov. 26, which is expected to be one of the most consequential in years as Treasury chief Rachel Reeves seeks to plug a hole in the public finances.

Reeves has put the country on notice that taxes will likely have to be raised in the budget, which could have a depressing effect on an already moribund economy and therefore prices. She has also indicated that one of the key missions of her budget will be to get inflation lower.

“At the budget later this month I will take the fair choices that are necessary to build the strong foundations for our economy so we can continue to cut waiting lists, cut the national debt and cut the cost of living," Reeves said after the bank's decision.

Bank of England Deputy Governor for Monetary Policy, Clare Lombardelli, gestures during the Monetary Policy Report news conference, in London, on Thursday, Nov. 6, 2025. (Maja Smiejkowska/Pool Photo via AP)

Andrew Bailey, Governor of the Bank of England, attends the Bank of England Monetary Policy Report news Conference, at the Bank of England, in the City of London on Thursday Nov. 6, 2025. (Maja Smiejkowska/PA via AP)

Andrew Bailey, Governor of the Bank of England, attends the Bank of England Monetary Policy Report news Conference at the Bank of England in London, England, Thursday Nov. 6, 2025. (Maja Smiejkowska/PA via AP)

The Bank of England in London, Thursday, Aug. 1, 2024. (AP Photo/Alberto Pezzali, File)

VATICAN CITY (AP) — Pope Leo XIV expressed hope that the U.S.-Israel war on Iran could be finished before Easter in remarks to reporters as he left the papal retreat at Castel Gandolfo outside of Rome on Tuesday.

“I’m told that President Trump has recently stated that he would like to end the war,’’ the U.S.-born pope said. “I hope that he’s looking for an off-ramp.’’

“Hopefully he’s looking for a way to decrease the amount of violence, of bombing, which would be a significant contribution to removing the hatred that’s being created, that’s increasing constantly in the Middle East and elsewhere.”

Leo called on all world leaders to return to dialogue and look for “ways to reduce the amount of violence,’’ so that “peace, especially at Easter, might reign in our hearts.’’

Leo's remarks came during Holy Week, the most sacred period of the year for Christians.

“It should be the holiest time of the year. It is a time of peace, a time of reflection. But as we all know, again, in the world, in many places we are seeing so much suffering, so many deaths, even innocent children,’’ Leo said. “We constantly make the call for peace, but unfortunately, many people want to promote hatred, violence, war.’’

On Palm Sunday, the pontiff said God doesn’t listen to the prayers of those who make war or cite God to justify their violence, as he prayed especially for Christians in the Middle East during Mass in St. Peter’s Square.

Leaders on all sides of the Iran war have used religion to justify their actions. U.S. officials, especially Defense Secretary Pete Hegseth, have invoked their Christian faith to cast the war as a Christian nation trying to vanquish its foes with military might.

Russia’s Orthodox Church, too, has justified Russia’s invasion of Ukraine as a “holy war” against a Western world it considers has fallen into evil.

As Holy Week continues, Leo will carry out the Holy Thursday foot-washing tradition in the basilica of St. John Lateran, where popes have performed it for decades. On Friday, Leo is due to preside over the Good Friday procession at Rome’s Colosseum commemorating Christ’s Passion and crucifixion, and will carry the cross himself. Saturday brings the late night Easter Vigil, during which Leo will baptize new Catholics, followed a few hours later by Easter Sunday when Christians commemorate the resurrection of Jesus.

Leo will celebrate Easter Sunday Mass in St. Peter’s Square and then deliver his Easter blessing from the loggia of the basilica.

Pope Leo XIV talks to journalists as he leaves his residence in Castel Gandolfo, on the outskirts of Rome, to return to the Vatican, Tuesday, March 31, 2026. (AP Photo/Gregorio Borgia)

Pope Leo XIV talks to journalists as he leaves his residence in Castel Gandolfo, on the outskirts of Rome, to return to the Vatican, Tuesday, March 31, 2026. (AP Photo/Gregorio Borgia)

Pope Leo XIV talks to journalists as he leaves his residence in Castel Gandolfo, on the outskirts of Rome, to return to the Vatican, Tuesday, March 31, 2026. (AP Photo/Gregorio Borgia)

Pope Leo XIV talks to journalists as he leaves his residence in Castel Gandolfo, on the outskirts of Rome, to return to the Vatican, Tuesday, March 31, 2026. (AP Photo/Gregorio Borgia)

Pope Leo XIV talks to journalists as he leaves his residence in Castel Gandolfo, on the outskirts of Rome, to return to the Vatican, Tuesday, March 31, 2026. (AP Photo/Gregorio Borgia)