- Decision
- Maintain
- Rate change
- 0 bps
- bank rate
- 3.75%
The Bank of England’s Monetary Policy Committee voted 6-3 to hold Bank Rate at 3.75% in July, judging that tighter financial conditions and underlying disinflation provided sufficient restraint despite upside inflation risks from volatile energy prices, while three members preferred a 25 basis point increase to 4%. Over the past year, Bank Rate was cut from 4.25% to 4% in August and to 3.75% in December 2025, then held. Consumer price index inflation fell to 2.6% but is expected to rise later in 2026 as higher energy costs pass through, although there is little evidence so far of material second-round effects and loose labour market conditions and soft demand should reduce inflation over time. The Middle East conflict remains the dominant source of uncertainty, with risks to energy prices skewed upward, while AI-related supply constraints and El Niño pose additional global price risks. The Committee stands ready to act as necessary to keep inflation on track to meet the 2% target in 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.