Bank of England Holds Rates as Hawkish Split Signals November Rate Rise

The Bank of England's Monetary Policy Committee held its interest rate at 3.75% on Wednesday, despite three members voting to raise it to 4%. The majority decision was seen as a public warning shot by the dissenting trio, who argued that waiting too long would make the inflation problem worse due to the exchange-rate channel.

The committee's statement noted that UK consumer price inflation accelerated to 3.1% in August, driven in part by energy costs that have not fallen since the Strait of Hormuz disruption began. The Bank's own forecasting projects CPI reaching 3.75% by the end of 2026 and edging above 4% at the start of 2027.

The decision to hold rates was partly due to soft UK growth data, which has been downgraded by the OECD in its June forecast. The energy picture remains a key factor in the trade-off between raising rates and potentially pushing a fragile economy into contraction.