The Bank of England (BOE) has kept the bank rate steady at 4.00% for September 2025. The decision was made with a vote of 2-7-0, where two members, Dhingra and Taylor, wanted to lower the rate by 25 basis points. Inflation is easing, especially in wages compared to prices. Although pay is rising, it is expected to slow down soon.

Medium Term Inflationary Pressures

Inflationary pressures in the medium term pose risks of rising prices, while economic activity may face downward challenges. A gradual approach to easing monetary policy is viewed as appropriate. The stable bank rate indicates a softer stance in current monetary policies. Future policy easing will rely on how much disinflation continues. The key takeaways from the August statement remain unchanged, maintaining a cautious approach on rate cuts. There are no new actions for market players to react to. While the hold at 4.00% was expected, the 2-7 vote for the second consecutive meeting highlights a dovish shift in the committee. This supports the idea that the next move will likely be a rate cut, encouraging traders to bet on reductions in November or December. The SONIA futures are indicating a lower policy rate by early 2026.

Cautionary Measures from Bank of England

This cautious approach is understandable given the latest ONS data from August 2025, which showed the headline CPI at 2.8%. This is a major improvement from the highs of 2023 but still exceeds the 2% target. With wage growth steady at 4.5%, the Bank can afford to wait for clearer signs of disinflation. For the pound, this dovish stance creates a mild pressure rather than a sharp decline, as a rate cut was not fully anticipated at this meeting. Traders are likely to sell GBP strength through options, potentially buying puts with strikes below current levels, rather than pursuing an immediate downturn. The lack of new guidance from the Bank should also reduce short-term volatility, making it appealing to sell straddles on GBP pairs. Equity markets, like the FTSE 100, may see some support since the trend is clearly towards easier monetary policies. However, concerns about “downside risks to economic activity” weigh heavily on sentiment, especially after Q2 2025 GDP showed a minimal growth of just 0.1%. This suggests that any rallies in equity index futures will likely be limited until we gain a clearer understanding of future growth. Create your live VT Markets account and start trading now.

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