The Bank of England’s Monetary Policy Committee (MPC) has voted to hold its base rate at 4% today, in a widely expected move.

The MPS voted by a majority of 7 – 2. Two members voted to reduce the base rate by 0.25 percentage points, to 3.75%.

The hold maintains the base rate at its lowest level for over two years, and follows three cuts to the base rate so far this year.

Explaining its decision, the MPC said that a ‘gradual and careful approach’ remains appropriate.

The MPC also voted by a majority of 7–2 to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £70bn over the next 12 months, to a total of £488bn.

In its predictions for the economy, the Bank said: “Underlying UK GDP growth has remained subdued, consistent with a continued, gradual loosening in the labour market, as well as a margin of slack in the economy. Downside domestic and geopolitical risks around economic activity remain.”

The hold of the base rate was widely predicted by analysts and economists, who also expected the MPC to be split over the decision.

Dean Butler, managing director for retail at Standard Life, said: “The Bank faces a difficult balancing act - inflation is currently at 3.8%, significantly higher than the 2% target, and it’s forecast to climb to 4% in September’s data. This keeps significant pressure on British households and policymakers alike. The fact that the decision comes just a day after the Federal Reserve cut US interest rates underlines a potential divergence in policy, reflecting the pressures and priorities facing each central bank.

“While the two banks are operating in different environments, it also raises questions about how long the Bank of England can resist following the Fed, particularly in the context of the UK’s fragile growth outlook.”

Lindsay James, investment strategist at Quilter, does not expect another rate cut until next year.

She said: “Whether or not the UK economy can wait until April before the next rate cut remains to be seen. Next sounded the alarm this morning in its latest results, citing concern about the UK’s economic prospects. With the Budget rumour mill in full swing and an expected downgraded in productivity from the Office for Budget Responsibility at the time Rachel Reeves stands to deliver the Budget, economic growth is likely to be desperately lacking for the remainder of the year. For now, inflation is the big concern and appears to be an issue neither the BoE nor the Government can tame.”

The next base rate decision is due on 6 November.