The Bank of England’s monetary policy committee voted to hold interest rates steady at 3.75% for a fifth consecutive meeting, though three members dissented and called for an increase. Catherine Mann joined Megan Greene and Huw Pill in supporting a rate rise, compared with a 7-2 split favoring higher rates at the previous decision.
The decision came as tensions in the Middle East raised concerns about potential inflation shocks to the UK economy. While inflation had declined to 2.6%, the Bank projected it would climb to 3.2% in the autumn as elevated energy costs transmitted through to household bills and broader economic activity. Crude and refined energy prices remained volatile and elevated relative to pre-conflict levels, though evidence of these costs feeding into wage demands remained limited.
The Bank indicated that upside risks to the inflation outlook predominated and stated it stood prepared to take action as necessary to maintain inflation’s path toward its 2% target. Analysts offered divergent views on the outlook, with some economists expecting rates to remain unchanged through the end of 2027, while others saw material probability of increases later this year. Market participants were pricing in one to two rate hikes over the coming months. The Bank signaled it would likely seek greater clarity on energy market developments and fiscal policy announcements before making further decisions.
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