The Bank of England's Monetary Policy Committee voted 6 to 3 this week to hold its key interest rate at 3.75%, resisting calls from a growing minority of its own members to raise borrowing costs further.
The three dissenting members wanted to lift the rate a quarter point to 4%, reflecting concern that energy prices, which have climbed as the conflict in the Middle East has disrupted oil markets, are starting to feed through into the broader UK economy. Consumer price inflation in Britain rose to 3.1% in August, above the Bank's 2% target, and the central bank's own guidance suggested it is likely to rise further in the coming months. In its policy statement, the Bank noted that protracted conflict in the Middle East has contributed to increases in crude and refined energy prices that remain more volatile and higher than before the conflict began.
This marks the Bank's sixth consecutive meeting holding rates steady, a stretch that has left UK borrowing costs elevated even as economic growth has been subdued, with unemployment ticking up to 4.4% and wage growth running at 4.1% a year. The committee's job is complicated by the fact that the inflation pressure it is currently facing is coming largely from energy markets abroad, something UK interest rates have only limited power to influence directly, rather than from domestic wage-price dynamics that rate policy is generally better suited to address.
Alongside the rate decision, the Bank confirmed it will continue gradually shrinking its bond holdings, built up during years of quantitative easing, at an average pace of about £46 billion a year through 2034. UK markets responded calmly to the announcement, with London's FTSE 100 index gaining 1.2% this week to close above 10,800, helped along by falling oil prices and lower bond yields.
The Bank's next scheduled decision is November 5, when it will also publish a full Monetary Policy Report; markets will be watching whether the current 6-3 split shifts toward a hike if oil prices stay elevated.
Why didn't the Bank of England raise rates given rising inflation?
A majority of the nine-member committee judged that holding steady was still appropriate, even though three members wanted to raise the rate to 4% because of energy-driven inflation.
When is the Bank's next rate decision?
The next scheduled Monetary Policy Committee decision is November 5, 2026.