BoE Governor Outlines UK Economic Outlook and AI Risks

The Bank of England has maintained the Bank Rate at 3.75%, with the decision reached by a 6-3 vote of the Monetary Policy Committee. This interest rate is projected to remain unchanged until at least mid-2027, provided no significant surprises occur.

GDP growth forecasts for the UK are set at approximately 1.1% for 2026 and 1.2% for 2027. Inflation is expected to peak at around 3.3%, which stays above the central bank's 2% target.

Governor Andrew Bailey has identified several structural pressures, including weak productivity and an aging population, which increase government debt and borrowing costs. He also noted risks from energy price volatility, trade-related shocks such as tariffs, and a potential correction in AI valuations.

In a severe downside scenario, a correction in AI valuations could reduce the UK's GDP by up to 2.2%. Governor Bailey stated that the UK economy is not currently sliding toward a recession.