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The Bank of England on Thursday left interest rates on hold at it continues to assess the ‘scale and duration’ of the Middle East conflict. In a widely expected move, the BoE’s Monetary Policy Committee voted 7-2 to leave bank rate at 3.75%. The central bank has maintained rates in each of its four meetings this year, with the last change a quarter point cut to 3.75% in December. Chief Economist Huw Pill put the case for a 25 basis points rate hike, as he did in April. At the June meeting Pill’s view was supported by Megan Greene. In a statement, the BoE noted global energy prices have fallen since the previous meeting but remain higher than pre-conflict and have continued to be volatile. The BoE said the impact of the energy shock on the UK economy remains uncertain and that the monetary policy stance required to achieve its 2% inflation target will depend on the scale and duration of the shock, and how it propagates through the economy. Data from the Office for National Statistics on Wednesday showed consumer price inflation held at 2.8% in May, unchanged from April and below the FXStreet-cited consensus for a rise to 3.0%. Core inflation, which excludes energy, food, alcohol and tobacco, accelerated slightly to 2.6% from 2.5%, though this was also below expectations for 2.7%. The BoE said inflation is expected to rise later this year as the effects of higher energy prices continue to pass through and the risk of material second-round effects in price and wage-setting, against which policy needs to lean, is greater the longer higher energy prices persist. But the labour market continues to loosen, and signs of a weakening economy could contain inflationary pressures, it noted. ‘Taking all the risks to the economic outlook into account, the Committee judges that it is appropriate to maintain bank rate at this meeting,’ the statement added. ‘The Committee stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term,’ the statement continued. BoE Governor Andrew Bailey said he was ‘content’ at the present time with holding, while accepting that risks to inflation and interest rates are on the upside. ‘I would respond promptly to any signals that an extended period of elevated energy prices could be leading to stronger possible second-round effects,’ he said. Pill said raising bank rate to 4% continues to be the most ‘robust’ monetary policy response to the intensification of the risks to inflation. ‘I continue to favour prompt but modest action on bank rate now,’ he added. Also backing a rate hike, Greene said: ‘Given significant uncertainty about the extent of second-round effects, we should pursue a risk management strategy.’ ‘A proactive hike now in bank rate should help anchor inflation expectations,’ she said. Those arguing for the status quo, said that the higher interest rates facing households and businesses were already acting to reduce inflation over time and therefore a hold in bank rate at this meeting was ‘appropriate’. Copyright 2026 Alliance News Ltd. All Rights Reserved.
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