The decision followed 14 successive increases since November 2021 as the Bank tried to control inflation, which has been slowing but remains high.
What is the Bank of England?
The Bank of England is the UKʼs central bank. It is independent of government but works closely with the Treasury.
It describes its key job as ensuring the UK has secure banknotes, stable prices, a safe banking sector and a resilient financial system.
Why does the Bank of England change interest rates?
The bank has a target to keep inflation - the official measure of how quickly prices are rising - at 2%.
The headline CPI inflation rate has dropped from a high of 11.1% in October 2022 to 6.7%, in August, down from 6.8% in July. The latest fall was due to food price inflation dropping back, but this remains at 13.6%.
Despite the latest fall, CPI is still more than three times the Bankʼs target.
"Core" inflation - which excludes the price of energy, food, alcohol and tobacco - dropped to 6.2% in August, down from 6.9% in July.
The recent sharp increases in inflation were initially due to rising energy and food costs - largely caused by global events such as the war in Ukraine - but other factors, things like wage increases in the UK, have also helped keep prices high
The bankʼs traditional response to rising inflation is to increase the UKʼs official interest rate.
This influences the saving and borrowing rates charged by High Street banks to individuals and businesses.
Since November 2021, the Bank has increased interest rates on 14 successive occasions.
However, in September, the bank held rates at 5.25%. It had been widely expected to put them up to 5.5%.
How does changing interest rates affect inflation?
Higher interest rates means people have to pay more for their mortgages, for example, which means they have less money to spend on other things.
Fewer people wanting to buy things should, in theory, mean that prices rise less quickly.
It also makes it harder for firms to borrow money and expand.
Alternatively, if the bank cuts interest rates, borrowing becomes cheaper, and people have more money to spend on other things.
This can encourage businesses and people to borrow and spend more, boosting the economy.
Despite the recent falls in the headline rate of inflation, the Bank of England was still expected to raise Interest rates again in September.
UK interest rates: How high could they go?
Why are prices rising so much?
Why inflation is falling but prices are still rising
How does the Bank of England change interest rates?
The Bankʼs Monetary Policy Committee (MPC) meets eight times a year to set rates.
Its nine members vote on whether to increase, reduce or hold interest rates.
Minutes of the meeting at which the decision was taken are also published.
Four times a year, the bank also publishes a Monetary Policy Report, which sets out the economic analysis and inflation projections that the MPC uses to make its interest rate decisions.
What else does the bank do?
The Bank of England also buys and sells government bonds.
Bonds are a bit like an "I owe you" from the government, which uses them to raise money to help meet its spending commitments.
In the period from the 2009 financial crisis until 2021, the Bank of England bought £875bn of government bonds. This was done through a process called quantitative easing, which was designed to reduce overall government borrowing costs, lower interest rates and stimulate spending in the economy.
The bank also announced an emergency bond-buying programme to try to stabilise the economy after September 2022ʼs mini-budget caused turmoil on financial markets.
Once that intervention ended, the bank said it would go ahead with a plan - first announced in August 2022 - to sell off some of the government bonds it holds.
What are the bankʼs other responsibilities?
The bank also:
produces banknotes and oversees credit and debit card payments
regulates banks and building societies
monitors risks in the UK financial system and acts to reduce them, like lending to banks if they need it. It shares responsibility for this with the Treasury and financial regulator, the Financial Conduct Authority
stores the UKʼs gold reserves - 400,000 bars worth more than £200bn - as well as those of other central banks.
Who is in charge of the Bank of England?
Andrew Bailey took over as governor in 2019, having already worked at the bank for more than 30 years.