Bank of England holds rates steady in narrow vote ahead of Autumn Budget

The Bank of England on Thursday voted narrowly to hold interest rates steady, exercising caution ahead of the government’s Autumn Budget in November.

Out of the BOE’s nine-member monetary policy committee, five members voted to hold the key interest rate, known as Bank Rate, at 4%, while four opted for a 25 basis point cut.

The vote was slimmer than expected with economists polled by Reuters expecting a 6-3 split in favor of a hold.

The BOE said in a statement that the inflation rate, at 3.8% in September, had likely peaked and that a disinflationary trend was underway. This was “supported by the still restrictive stance of monetary policy,” it said.

“This is reflected in an easing of pay growth and services price inflation. Underlying disinflation is being underpinned by subdued economic growth and building slack in the labour market,” the bank added.

The BOE cautioned that future rate cuts “will therefore depend on the evolution of the outlook for inflation. If progress on disinflation continues, Bank Rate is likely to continue on a gradual downward path.”

“I think this is the doves winning the argument,” Victoria Clarke, U.K. chief economist at Santander CIB, told CNBC Thursday.

″[BOE Governor Andrew] Bailey has made it clear he wants a bit more data and that was certainly my judgement, that there is a lot of value in waiting for December. You’ve got two more CPI [inflation] prints coming and two more labor market prints and, of course, this massive budget,” she told CNBC’s Decision Time.

Yields on U.K. government bonds fell across the board, with the yield on the benchmark 10-year gilt shedding almost 3 basis points. Meanwhile the British pound trimmed earlier gains to trade 0.18% higher against the U.S. dollar.