Bank of England holds interest rates at 3.75 per cent

The Bank of England has decided to hold interest rates at 3.75 per cent following a 6-3 vote by the Monetary Policy Committee (MPC). The decision comes as recent data indicates inflation has eased to 2.6 per cent.

Despite the hold, policymakers cautioned that “policy strategy could change” due to potential risks in the second half of the year. Concerns include possible re-escalation of conflict in the Middle East, which could disrupt energy prices, and potential trade disruptions in the Gulf region. Other risks cited include heatwaves affecting suppliers, refinery disruptions, and shortages in AI hardware.

The Bank forecasts that inflation will hover around 3.2 per cent in early 2027 before returning to the target rate by the end of that year. In the split vote, Catherine Mann, Megan Greene, and Huw Pill advocated for a 25 basis point hike, with Mann citing the breakdown in US-Iran relations as a key factor.