Bank of England Holds Bank Rate at 3.75% in a Split Decision

The Bank of England kept its Bank Rate unchanged at 3.75% following a divided vote among policymakers, reflecting sharp disagreement over the inflation outlook as the conflict in the Middle East pushes up energy prices. UK consumer price inflation stood at 2.6% in June, above the Bank's 2% target, and its central projection now shows inflation peaking at around 3.2% in the final quarter of 2026 before easing back. The Monetary Policy Committee cautioned that risks to the inflation outlook are tilted to the upside, while warning that developments in the Middle East could change the picture. The Bank had been steadily lowering rates from a peak of 5.25%, reaching 3.75% by late 2025, but the energy shock has interrupted that easing cycle and dampened expectations of further near-term cuts. Alongside its rate decision, the Bank is continuing to shrink its balance sheet, reducing its stock of asset purchases as part of quantitative tightening. Its next scheduled decision is due in mid-September. For households and businesses, the hold keeps borrowing costs elevated, with mortgage and loan rates likely to remain higher for longer while inflation risks persist.