The Bank of England's Monetary Policy Committee voted 7-2 to hold the Bank Rate at 3.75% on June 18, with two members preferring a 0.25-point hike. The decision followed UK CPI inflation easing to 2.8% in May and a US-Iran peace deal that eased oil prices, though the Bank warned inflation could rise above 3% later in 2026 as earlier energy increases feed through.
The Bank of England held its benchmark Bank Rate at 3.75% on June 18, 2026, marking the fourth consecutive meeting at this level. The Monetary Policy Committee (MPC) voted 7-2 in favour of the hold, with two members preferring a 25-basis-point increase to 4.00% — a hawkish split that reflects ongoing concern about energy-driven inflation risks tied to the Middle East conflict.
UK CPI inflation eased to 2.8% in May 2026, unchanged from April's 13-month low and below the Bank's own expectations. However, the MPC cautioned that inflation could rise again later in the year as earlier energy price increases continue to feed through the economy. Based on energy market pricing as of June 15, the Bank now expects CPI inflation to be 'a little under 3% in 2026 Q3' and 'a little over 3.25% in Q4' — somewhat lower than its April forecasts, reflecting the impact of the recently announced US-Iran peace deal that has eased oil prices.
The Bank flagged the risk of 'second-round effects' — where higher energy costs prompt businesses to raise prices and workers to demand higher wages — warning that this risk grows the longer elevated energy costs persist. At the same time, policymakers noted that the UK labour market is showing signs of cooling and broader economic momentum appears to be weakening, which could help contain inflationary pressure.
The MPC also continues its quantitative tightening programme, reducing its asset holdings from a peak of £895 billion to £523 billion as of June 10, 2026. The decision provides relief for borrowers on tracker mortgages, who avoid an immediate increase in repayments. Several major UK lenders — including Nationwide, HSBC, NatWest, and TSB — have recently cut selected fixed-rate mortgage deals, with a growing number offering sub-4% products for borrowers with larger deposits. The next MPC decision is scheduled for July 30, 2026.
Key Points
- 1The Bank of England held Bank Rate at 3.75% on June 18 in a 7-2 vote; two members wanted a hike to 4%
- 2UK CPI inflation eased to 2.8% in May but is expected to rise above 3% later in 2026
- 3The recently announced US-Iran peace deal eased oil prices and lowered the Bank's inflation forecast
- 4The Bank warned of 'second-round effects' on wages and prices if energy costs stay elevated
- 5The MPC continues quantitative tightening, reducing asset holdings to £523 billion as of June 10
Why This Matters
The Bank of England's hold offers near-term stability for UK borrowers, particularly the 1.8 million homeowners due to remortgage this year and those on tracker mortgages. The hawkish 7-2 split, however, signals that the path forward is far from settled — much depends on whether the US-Iran peace deal holds and energy prices stay contained. For UK consumers, insurers, and lenders, the decision underscores how geopolitical events continue to dominate the inflation and rate outlook.
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