The Bank of England kept its benchmark interest rate at 3.75% on Wednesday, holding borrowing costs steady even as inflation across the country reached its highest level in five months. The decision from the Monetary Policy Committee came in a 6 to 3 vote. The three dissenting members pushed for a quarter point increase to 4%, arguing that price pressures needed a firmer response, while the majority favored waiting.
Consumer price inflation rose to 3.1% in the latest reading, and the central bank signaled that it expects the figure to climb further over the coming quarters. Policymakers said the risks around inflation were “tilted to the upside, and more so than at the time of the July Monetary Policy Report”, pointing to forces that could keep prices elevated for longer than previously judged.
Energy costs featured heavily in the committee’s assessment. As of 14 September, Brent crude traded at about $106 a barrel, up 36% since July, while UK wholesale gas reached 207 pence per therm, a rise of 78% over the same stretch. Even so, the bank noted that “there has been little evidence so far of material second-round effects in price and wage-setting”, a sign that higher energy bills had not yet spread broadly into pay and consumer prices.
The hold set the Bank of England apart from several other major central banks that moved to tighten policy in the same week. The US Federal Reserve raised its target range to 3.75% to 4%, its first increase since 2023, while the European Central Bank lifted its deposit rate to 2.5%. The contrast underlined how differently policymakers are reading the balance between supporting growth and containing prices.
For the three members who backed a rise, the case rested on the danger that persistent inflation could become embedded if left unchecked. The majority judged that holding gave them room to see how energy costs and wage trends develop before committing to further moves. Attention now turns to upcoming data and the bank’s next scheduled decision, which will test whether the pause holds or gives way to tightening in the months ahead.
