- Decision
- Maintain
- Rate change
- 0 bps
- bank rate
- 3.75%
The Bank of England’s Monetary Policy Committee kept Bank Rate unchanged at 3.75 % on 4 February by a 5–4 vote, judging that while CPI inflation (3.4 % in December) is set to drop to “around the 2 % target from April” as energy-related base effects and Budget-2025 measures feed through, it must also be confident that price and wage dynamics stay consistent with lasting price stability amid soft growth and a loosening labour market. Since August 2024 the MPC has lowered Bank Rate by a cumulative 150 bp, including a 25 bp cut to 3.75 % in December 2025. The Committee notes that policy remains restrictive but, as that restrictiveness has already diminished, further reductions “are likely,” though the timing and scale of any moves will be judged meeting-by-meeting. Pay growth and services inflation continue to moderate, the unemployment rate has edged above 5 %, and Bank staff see a slightly wider output gap alongside risks that weak demand and elevated household saving could push inflation below target. Softer UK import prices—helped by lower global energy costs and dampened export prices as US tariffs weigh on world trade—are adding to disinflation, yet the MPC is alert to residual risks from “greater inflation persistence.” Members agreed that global uncertainty and tariff developments warrant caution, and signalled that any additional easing will proceed at a slower pace as they seek “assurance about how the risks are evolving.”
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.