- Decision
- Lower
- Rate change
- 25 bps
- bank rate
- 4%
The Bank of England’s Monetary Policy Committee voted 5–4 to cut Bank Rate by 25 bp to 4.0%, judging that continued, if uneven, easing in underlying domestic price and wage pressures and a subdued growth backdrop with emerging economic slack allow a modest further withdrawal of monetary restraint while remaining alert to slightly higher upside risks to medium-term inflation. Following February’s initial 25 bp cut to 4.5% and a further 25 bp reduction in May, the cumulative easing since early 2025 now totals 50 bp. No changes were announced to the stock of UK government bonds held for monetary policy purposes (£586 bn). Twelve-month CPI inflation rose to 3.5 % in Q2 and is projected to peak near 4 % in September before returning towards the 2 % target; private-sector regular pay growth has slipped to just under 5 % and is expected to slow to about 3¾ % by year-end as the labour market gradually loosens, with GDP growth estimated at 0.1 % in Q2 and a modest pickup to 0.3 % in Q3. The Committee noted reduced trade-policy uncertainty and slightly firmer global demand, while acknowledging lingering geopolitical risks. It reaffirmed that monetary policy remains restrictive and signalled that any further rate reductions will be “gradual and careful”, contingent on sustained progress in disinflation and evolving data.
Rate evolution
Since June 2025, the Bank of England has cut Bank Rate by 50 basis points from 4.25% to 3.75%, with reductions in August and December, an autumn pause and holds in April, June, July and September 2026, citing substantial disinflation, weak GDP growth, a loosening labour market and moderating pay. The Monetary Policy Committee remained vigilant over services inflation, expectations and wage and price persistence as administered, food and energy prices lifted headline CPI inflation, but by late 2025 and early 2026 it judged persistence risks less pronounced and weaker demand more apparent as CPI inflation peaked and pay and services inflation eased further, while retaining a gradual, non-pre-set easing bias.
In April, the Committee voted 8-1 to maintain Bank Rate at 3.75%, with one member preferring an increase to 4%, as the Middle East conflict raised the energy price outlook and CPI inflation increased to 3.3%, flagging risks of second-round effects while noting that a loosening labour market, a weakening economy and tighter financial conditions could contain inflationary pressures. It held Bank Rate at 3.75% by a 7-2 vote in June as CPI inflation fell to 2.8% and global energy prices declined but remained above pre-conflict levels and volatile, then held again by a 6-3 vote on 29 July, when three members preferred an increase to 4% and persistent energy-price volatility and second-round risks tilted inflation risks upward despite continued underlying disinflation and a fall in CPI inflation to 2.6%.
At its meeting ending on 16 September, the Committee maintained Bank Rate at 3.75% by another 6-3 vote, with three members again preferring an increase to 4%, as the protracted Middle East conflict drove further increases in volatile energy prices and CPI inflation rose to 3.1% in August. It noted little evidence so far of material second-round effects and said soft labour market conditions and higher interest rates faced by households and businesses would reduce inflation over time despite slightly stronger activity, but judged that risks to the inflation outlook had tilted further to the upside since July.