- Decision
- Maintain
- Rate change
- 0 bps
- bank rate
- 3.75%
The Bank of England’s Monetary Policy Committee (MPC) voted 8–1 to keep Bank Rate at 3.75 percent, judging that the energy-led rise in inflation risks is balanced by a weakening domestic economy, a loosening labour market and tighter financial conditions that will help contain price pressures. After 75 bp of cumulative easing between February and December 2025, the policy rate has been unchanged in 2026. No changes were announced to the operational framework or liquidity management. Consumer price index (CPI) inflation climbed to 3.3 percent in March and is projected to edge higher later in 2026 as fuel and utility costs reflect the recent energy shock; the MPC sees “material” risks of second-round wage-price effects but also notes that slack is emerging and financial conditions have firmed since the conflict began. The Middle East war has injected acute uncertainty into global energy markets, lifting oil and gas prices and tightening UK financial conditions. The Committee stressed it will “monitor closely” how the shock propagates through prices, wages and activity and “stands ready to act” to keep CPI on track to its 2 percent target over the medium term.
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.