- Decision
- Maintain
- Rate change
- 0 bps
- bank rate
- 3.75%
The Bank of England’s Monetary Policy Committee (MPC) voted 6-3 to hold Bank Rate at 3.75% in September, with the minority preferring a 25-basis-point increase, as the protracted Middle East conflict and higher energy prices tilted inflation risks further to the upside despite little evidence of material second-round wage and price effects. This extended the hold at 3.75% since a December 2025 cut from 4%. The MPC also voted unanimously to reduce its stock of UK government bonds held for monetary policy purposes to zero under a multi-year plan averaging GBP 46 billion of annual unwind through end-2034, including GBP 20 billion in yearly sales alongside maturities. Consumer price index (CPI) inflation rose to 3.1% in August and is expected to reach around 3.75% in 2026 Q4 and slightly above 4% in 2027 Q1, against the 2% target, while gross domestic product grew 0.4% in 2026 Q2 and activity has been slightly stronger than expected, although soft labour market conditions and higher financing costs should restrain inflation over time. Globally, conflicts in the Middle East and in Ukraine and Russia have increased the level and volatility of crude, gas and refined energy prices, while food and artificial intelligence-related supply pressures pose additional upside risks. The MPC stands ready to act as necessary to keep inflation on track to meet the target sustainably 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.