ISTANBUL

The Bank of England on Thursday kept its benchmark interest rate at 4%, in line with the market forecasts.

The move marked the end of a five rate cuts run since the bank began lowering borrowing costs last August.

"There has been substantial disinflation over the past two and a half years, following previous external shocks, supported by the restrictive stance of monetary policy," a bank statement said.

"That progress has allowed for reductions in Bank Rate over the past year. The Committee remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term," it said.

The bank stated that underlying disinflation has continued, albeit with greater progress in easing wage pressures than prices.

"Twelve-month CPI inflation was 3.8% in August, and is expected to increase slightly in September, before falling towards the 2% target thereafter," it said.

The bank stressed that it remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process.

"Underlying UK GDP growth has remained subdued, consistent with a continued, gradual loosening in the labor market, as well as a margin of slack in the economy. Downside domestic and geopolitical risks around economic activity remain," it said.

The central bank said a "gradual and careful" approach to the further withdrawal of monetary policy restraint remains appropriate.

"The restrictiveness of monetary policy has fallen as Bank Rate has been reduced. The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease," it added.

The decision was taken by the bank's Monetary Policy Committee on a majority 7-2 vote.

Annual consumer inflation in the UK was at 3.8% in August, stable from the previous month, but at its highest level since January 2024.