The Bank of England kept its key interest rate unchanged at 3.75 percent on July 30, 2026, marking the fifth consecutive meeting without a change.
The Monetary Policy Committee voted 6-3 to hold borrowing costs, defying expectations of a 7-2 split among economists surveyed by Reuters.
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Three members—Catherine Mann, Megan Greene, and Chief Economist Huw Pill—voted to raise rates to 4 percent, citing renewed military conflict between the US and Iran.
Inflation and Growth Outlook
The central bank's updated projections show UK inflation rising from a 15-month low of 2.6 percent in June to 3.2 percent later this year, driven by volatile energy prices.
Despite the anticipated short-term rise, officials revised down the peak inflation outlook while raising economic growth forecasts for the year.
Governor Andrew Bailey said holding the rate is appropriate as global conditions are more uncertain and inflationary, while domestic conditions are more benign for inflation prospects.
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Prime Minister Andy Burnham announced cost-of-living measures, including removing a tax on electricity bills, which central bankers estimate will reduce headline inflation by a tenth of a percentage point.
Officials noted that European Central Bank policy tightened earlier in the year, while the UK maintained stability after prior rate adjustments and a contraction in private-sector pay growth to its lowest since 2020.
Mann cited escalating regional hostilities and the breakdown of a tentative truce as the core driver for her hawkish position, describing the conflict as a 'sporadic continuance.'
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In a separate financial assessment, the Bank noted its quantitative tightening program added 0.2 to 0.3 percentage points to gilt yields since 2022, ahead of a planned September vote on adjusting its annual bond reduction pace.
