Bank of England holds Bank Rate at 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 we