Bank of England keeps rates on hold as peers hike

At a glance

• Interest rates remain at 3.75%
• This decision was widely expected by economists
• The vote wasn’t unanimous – three members of the nine-member committee voted to raise the base rate to 4%

The Bank of England (BoE) has voted to keep interest rates at 3.75% despite rising inflationary pressures.

The BoE acknowledged the disruption to energy caused by the Iran conflict, and its impact on fuel costs and utility bills. However, it said that so far it had seen little evidence of significant knock-on effects on prices and wages.

Andrew Bailey, BoE Governor, said: “Today, we’ve held Bank Rate at 3.75%. So far, higher global energy costs have had a limited effect on price and wage setting in the UK. But the longer this volatility persists, the bigger the impact it will have on inflation, and the more likely it is we will need to raise Bank Rate to ensure that inflation falls back to our 2% target.”

US and Euro rates rise

The decision by the BoE was something of an outlier. Last week the European Central Bank voted to increase interest rates.

Overnight, the US Federal Reserve (Fed) also voted to increase interest rates in response to persistent inflationary pressures.

With fuel prices rapidly rising recently due to the Iran conflict, markets had already priced in a rate Fed increase before the meeting. The vote for a quarter point rate rise was unanimous. Fed Chair Kevin Warsh said, “The plain fact is that inflation is too high and has been for too long.”

While the vote marked the first increase since 2023, it may not be the last. In its projections, the Fed also noted that the majority of the rate-setting committee expect a further increase later this year.

SJP Approved 17/09/2026