- Decision
- Maintain
- Rate change
- 0 bps
- bank rate
- 4%
The Bank of England’s Monetary Policy Committee (MPC) kept Bank Rate unchanged at 4.0% by a 7–2 vote at its 17 September meeting, judging that while “substantial” progress on disinflation continues, upside risks from a temporary rise in CPI and still-elevated wage growth warrant a pause in further easing as it seeks to return inflation sustainably to the 2% target. After three 25 bp cuts in February, May and August, Bank Rate has fallen a cumulative 75 bp from 4.75% over the past year. The MPC also voted 7–2 to slow quantitative tightening, instructing the Bank to shrink its gilt portfolio by GBP 70 bn over the coming 12 months to GBP 488 bn. Twelve-month CPI inflation stood at 3.8 % in August, is projected to edge up to about 4 % in September, then decline towards target as pay growth—currently 4.7% y/y—falls “significantly” and wage pressures abate; UK GDP grew just 0.3 % q/q in Q2 and underlying growth remains subdued amid a gradually loosening labour market. Financial conditions have tightened slightly since August, reflecting a higher market path for Bank Rate and a firmer sterling. Globally, UK-weighted growth in Q2 beat earlier expectations, but trade-policy uncertainty and geopolitical risks persist alongside a near-20% average US tariff rate. The MPC reiterates that policy is “not on a pre-set path”; future reductions in restrictiveness will be “gradual and careful” and contingent on further evidence that underlying disinflation is entrenched.
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.