Bank of England holds interest rates at 3.75%

The Bank of England’s Monetary Policy Committee (MPC) has voted to hold interest rates once again at 3.75%.

The Bank’s economists voted 8 to 1 in favour of the decision, with one member supporting raising interest rates by 0.25 percentage points.

Informing the decision, the MPC cited high levels of uncertainty in the economy due to conflict in the Middle East and resulting rises in energy and fuel prices.

With CPI inflation rising to 3.3% in March, and set to climb further, the Bank indicated it would be likely to raise interest rates in the future if necessary to curtail price rises. However, the MPC also indicated that a weakening of the economy and the labour market could also help contain inflationary pressures, anticipating that firms could be less willing to pass increased costs on to customers to help maintain sales levels, while higher unemployment and reduced hiring activity could curtail wage growth.

Looking ahead, while interest rates are more likely to rise in 2026, the impact of conflict in Iran has had a more subdued effect on energy prices in the UK when compared to Russia’s 2022 invasion of Ukraine, and so inflation is not expected to reach the same levels as its previous peak in late 2022 and early 2023.

The Bank of England’s decision follows that of its US counterpart, the Federal Reserve, which also opted to hold interest rates on 29th April.