Bank of England holds rate at 3.75% as three policymakers vote for a hike

The Bank of England left its main interest rate unchanged at 3.75% in a decision published on September 17, 2026, but the vote was split. At its meeting ending on 16 September, the Monetary Policy Committee voted 6-3 to keep Bank Rate where it is, while three members wanted a quarter-point increase.

How the committee voted

Governor Andrew Bailey, Sarah Breeden, Swati Dhingra, Clare Lombardelli, Dave Ramsden and Alan Taylor voted to maintain Bank Rate at 3.75%. Megan Greene, Catherine L Mann and Huw Pill voted to raise it by 0.25 percentage points to 4%.

According to the Bank's published minutes, the three members who favoured a rise pointed to energy prices moving closer to the Bank's adverse scenario, with an inflation surge expected in early 2027 coinciding with wage settlements. They also judged that slack in the economy appeared to have peaked, given stronger GDP and employment indicators, and argued for a risk-management approach to anchor inflation expectations.

Energy prices and inflation

The Bank tied the decision to the conflict in the Middle East. "Protracted conflict in the Middle East has contributed to further increases in crude and refined energy prices since the previous meeting, which remain more volatile and higher than pre-conflict," the Monetary Policy Summary said.

UK CPI inflation rose to 3.1% in August. The Bank said inflation is likely to rise further, to around 3.75% in the fourth quarter of 2026 and slightly above 4% in the first quarter of 2027.

The committee said: "There has been little evidence so far of material second-round effects in price and wage-setting. However, the risk of such effects, against which policy needs to lean, is greater the longer higher energy prices persist or are more volatile."

On the outlook for rates, it said: "The Committee stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term."

Growth, jobs and bond sales

The Bank noted that UK GDP grew 0.4% in the second quarter of 2026 and 0.4% in July, and it projects 0.4% growth in the third quarter. Unemployment was 4.9% in the three months to July, and private sector wage growth was 2.9% over the same period.

Separately, the committee voted unanimously on its government bond holdings. The Bank plans to reduce its gilt stock by about £46 billion a year, made up of £20 billion of annual sales alongside maturing gilts, bringing holdings to zero by the end of 2034.

Why it matters

The split vote shows that a third of the committee was ready to raise borrowing costs now to keep the energy shock from feeding into wages and prices. The Bank itself projects inflation above 4% early next year, double its 2% target, and it says the risk of second-round effects grows the longer high energy prices last. The decision came a day after the U.S. Federal Reserve raised its own rate, as central banks respond to higher energy prices linked to the Middle East conflict.

Sources

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.