BoE Holds Rates, Flags Higher Inflation Risk Ahead of UK Budget

The Bank of England has maintained its benchmark interest rate at 3.75% after a 6-3 vote, despite growing concerns over inflation. The central bank's latest meeting minutes reveal a firmer tone on the risk of future increases in borrowing costs.

According to the BoE, higher global energy costs have had only a limited effect on price and wage setting in the UK so far, but Governor Andrew Bailey warned that a longer period of volatility would be more likely to push inflation higher and require Bank Rate to rise to return inflation to its 2% target.

The central bank has raised its estimate for third-quarter economic growth to 0.4% from 0.1%, but says inflation, which stands at 3.1% in August, could now reach slightly over 4% in early 2027.