Bank of England Holds Rate at 3.75% as UK Inflation Stays Above Target

The Bank of England's Monetary Policy Committee voted 8-1 on Thursday to hold Bank Rate at 3.75%, extending the pause that has been in place since November 2025 as persistent UK inflation prevents a return to easing.

What the MPC Decided

The nine-member committee kept Bank Rate at 3.75% for the second consecutive meeting. The vote split was 8-1, unchanged from April: one member voted for a 25 basis point increase.

UK CPI inflation stood at 2.8% in May 2026, data released on Wednesday. The BoE's 2% target remains out of reach. The Bank's own projections show CPI rising further through Q3 and Q4 2026 before easing.

Key figures from the June decision:

• Bank Rate: 3.75%, unchanged since November 2025
• May CPI: 2.8%, above the 2% target
• Vote split: 8-1 to hold, one hawkish dissent
• Next MPC meeting: August 2026

Why the Hold Is More Hawkish Than It Looks

A hold with a lone hawkish dissent does not signal a rate cycle peak. It signals an undecided committee. The single member voting for a hike in April returned the same view in June, and the MPC minutes will show whether others are moving in that direction.

Governor Bailey, at the post-decision press conference, reiterated that the committee was closely monitoring services inflation and wage growth before committing to any policy change. Both remain elevated.

The international context matters. The ECB raised its deposit facility rate to 2.25% at its June 11 meeting, its first increase since September 2023. At the Fed's June 17 meeting, rates were held at 3.5% to 3.75%, but nine of 18 FOMC members projected at least one rate increase this year.

The BoE is pausing while both major peers signal further tightening. That positions the Bank for higher-for-longer, not a pivot toward cuts.

What Investors Should Watch Before August

The 10-year gilt yield held steady after Thursday's announcement, reflecting the hold was fully priced in. Sterling was broadly flat.

Three data points carry the most weight before August:

• June CPI (mid-July): A reading above 3% would sharply raise the case for a hike.
• UK wage data (mid-July): Services inflation is largely wage-driven. A re-acceleration would reinforce the hawkish minority.
• Oil prices: Middle East supply dynamics have been the dominant cost-push factor in UK inflation through 2026.

The BoE raised Bank Rate to a cycle peak of 5.25% before cutting to 3.75% through 2025. Whether the trough holds, or the Bank moves back above 4%, will be determined by data published over the next six weeks.