The Bank of England maintained its benchmark interest rate at 3.75% on September 17. This marks the sixth consecutive meeting where the rate remained unchanged since the last cut in December 2025. The decision follows an August inflation report showing a rise to 3.1%, exceeding the government's 2% target.
Internal division within the Monetary Policy Committee was evident, as the vote split 6-3. Three members advocated for a 25 basis point increase to 4.0%. The committee cited rising motor fuel prices, driven by geopolitical tensions in the Middle East and supply chain disruptions, as the primary factors behind the inflation surge.
Projections from the Bank of England suggest inflation could reach 3.75% by the end of 2026 and potentially exceed 4% in early 2027. Despite these forecasts, the committee noted limited evidence of second-round effects, such as widespread wage demands or broad price hikes by businesses.
In addition to the rate decision, the committee voted unanimously to conclude its quantitative tightening program. The Bank of England will reduce its holdings of UK government bonds financed by central bank reserves to zero. The next policy meeting is scheduled for November 5.
