Bank Rate held at 3.75 percent in 6–3 vote as energy risks persist

The Monetary Policy Committee voted 6–3 to keep Bank Rate at 3.75 percent, with three members favoring a 25 basis point increase to 4.0 percent.

CPI inflation fell to 2.6 percent in June 2026 but is projected to pick up to 3.2 percent in the fourth quarter as higher global energy prices pass through supply chains.

Indirect energy effects are expected to add 0.5 percentage points to headline inflation by December, pushing food inflation to nearly 3.5 percent.

Economic activity remains subdued, with underlying GDP growth estimated at zero in the third quarter.

Labour market conditions continue to loosen; unemployment stood at 4.9 percent in May and is expected to reach 5.1 percent by year-end, while private sector regular wage growth moderated to 2.9 percent.

The Committee evaluated three economic scenarios to model energy price risks.

The central projection foresees inflation returning to the 2.0 percent target in 2027, whereas an adverse scenario with persistent energy shocks pushes inflation to 4.5 percent.

Updated analysis indicates quantitative tightening will reduce gilt holdings in the Asset Purchase Facility to £488 billion by September 2026.

Cumulative balance sheet reduction since 2022 has raised 10-year gilt yields by an estimated 20 to 30 basis points, while broad money growth remains aligned with estimated equilibrium levels.