Bank holds interest rate at 4% amid inflation jitters, soft growth and budget speculation about possible tax rises.

The Bank of England’s decision to pause rate cuts reflects a delicate balancing act between stubborn inflation and a sluggish economy. With inflation still hovering above the 2% target, the Bank remains wary of easing borrowing costs despite faltering growth and rising unemployment risks. A weaker labour market—unemployment edging up to 5% and wage growth losing pace—alongside subdued investment points to slowing economic momentum, which would normally justify a rate cut. Yet sticky inflation keeps policymakers on edge. With a cautious fiscal backdrop and potential tax rises in the upcoming budget, the next move on 18 December will likely depend on how the latest data unfold.

Will Bank of England governor Andrew Bailey play Santa or Scrooge on interest rates? - BBC News

1. Explain what the Bank of England’s base rate is and how it affects the cost of borrowing in the economy. Use evidence from the article.

2. Discuss one demand-side factor and one supply-side factor that influenced the Bank of England’s recent decision to hold interest rates.

3. Evaluate whether the Bank of England is likely to act as Scrooge or Santa at its 18th December meeting.