Professor Joe Nellis is economic adviser at MHA, the accountancy and advisory firm. 

The Monetary Policy Committee (MPC) has chosen to keep interest rates at 4%, maintaining its firm and cautious stance as inflation remains well above the 2% target.

Given that inflation has held at 3.8% for three consecutive months and underlying domestic pressures — particularly in wages and services — have yet to ease decisively, this is a wise decision from the MPC. While inflation is far below the October 2022 peak of 11.1%, policymakers remain cautious about loosening too soon and risking a renewed rise in prices.

However, should headline inflation begin to cool ahead of the MPC’s meeting on 18th December, there’s a chance that the gift of an interest rate cut could be placed under the tree just in time for Christmas.

The broader economy shows little momentum. Growth is flat, business investment is subdued, and household confidence remains weak after an extended period of high borrowing costs and limited real wage growth. This combination of easing inflation and weak demand leaves the UK in a delicate position — stable, but without clear signs of recovery.

Attention now shifts to the Autumn Budget, which is set to play a crucial role in shaping the near-term outlook. With monetary policy effectively on hold, the government faces calls to use fiscal policy to stimulate growth, attract investment, and support productivity, while avoiding measures that could reignite inflation or undermine market confidence. UK gilts now sit at one of their lowest levels this year, and the Chancellor will be keen to maintain this.

For businesses, the environment remains testing. Credit conditions are tight, and cost pressures persist, even as energy prices fall. The path ahead will depend on whether fiscal and monetary policies can align effectively to stabilise prices, encourage investment, and lift economic momentum into 2026.