BoE holds Bank Rate at 3.75%

September 17, 2026 (MLN): The Bank of England's Monetary Policy Committee (MPC) voted by a majority of 6–3 to keep the Bank Rate unchanged at 3.75%, with three members favouring a 0.25 percentage point increase to 4%.

The committee said protracted conflict in the Middle East had driven further increases in crude and refined energy prices since its previous meeting, with prices remaining more volatile and elevated compared to pre-conflict levels.

UK CPI inflation rose to 3.1% in August and is likely to climb further over the coming quarters, the M% noted, adding that monetary policy is being calibrated to bring inflation back to the 2% target sustainably as the economy adjusts to the energy shock, according to  a press release issued by the bank.

The committee said the policy stance required to achieve this would depend on the scale and duration of the shock and how it propagates through the economy.

It observed little evidence so far of material second-round effects in price and wage-setting, though it cautioned that the risk of such effects grows the longer higher energy prices persist or remain volatile.

Economic activity has been slightly stronger than expected, the MPC said, though soft labour market conditions and the higher interest rates faced by households and businesses since the conflict began are expected to weigh on inflation over time.

Overall, the committee judged that risks to the inflation outlook are tilted to the upside, and more so than at the time of the July Monetary Policy Report, while noting scope for the outlook to shift materially as events in the Middle East unfold.

The MPC said it deemed it appropriate to hold the Bank Rate at this meeting and stood ready to act as necessary to keep CPI inflation on track to meet the 2% target in the medium term.

Separately, the committee voted unanimously to reduce its stock of UK government bond purchases, held for monetary policy purposes and financed through the issuance of central bank reserves, to zero.

 The unwind will be carried out through a multi-year plan, with the remaining stock reduced at an annual average pace of £46bn by the end of 2034, via annual sales of £20bn alongside maturing gilts.

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