- Decision
- Maintain
- Rate change
- 0 bps
- bank rate
- 3.75%
The Bank of England’s Monetary Policy Committee voted 7-2 to maintain Bank Rate at 3.75% in June 2026, judging that weaker demand and a loosening labour market should help contain second-round inflation effects from the energy shock linked to events in the Middle East even as inflation is expected to rise later in the year, while two members preferred a 0.25 percentage point increase to 4.0%. CPI inflation was 2.8% in May, down from 3.3% in March and below the April Report forecast, and the Committee now expects it to be a little under 3% in 2026 Q3 and a little over 3¼% in Q4, against the 2% target. UK GDP rose 0.6% in 2026 Q1 but the Bank of England judged underlying momentum subdued at around 0.2%, with April GDP down 0.1%, the S&P Global UK composite output PMI falling below 50 in May, and vacancies continuing to decline, consistent with a gradual loosening in the labour market despite unemployment edging down to 4.9%. The Monetary Policy Committee said higher interest rates faced by households and businesses since the conflict were already tightening financial conditions and would reduce inflation over time. Globally, energy prices had fallen since the previous meeting as plans for a Middle East peace deal were announced, but remained above pre-conflict levels and volatile, with some signs of wider commodity and supply chain pressures. The Committee said the policy stance would depend on the scale and persistence of the shock and any evidence that higher energy prices were becoming embedded in wage and price-setting, and it stands ready to act as necessary to return inflation sustainably to target.
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.