BoE Holds Rates Steady as Inflation Forecast to Ease Below Target

The Bank of England held its benchmark interest rate steady at 3.75% after its Monetary Policy Committee voted 6-3 to leave rates unchanged on Thursday.

The central bank's projections show inflation peaking at 3.2% in the fourth quarter of 2026 before easing below its 2% target to 1.7% in the first quarter of 2028, and then edging up to 1.9% by the third quarter of 2029.

Economic growth is forecast to remain steady at an annual rate of 1.1% in both the third quarter of 2026 and the third quarter of 2027, before accelerating to 1.7% in the third quarter of 2028 and moderating slightly to 1.6% a year later.

The central scenario assumes oil prices gradually ease from around $76 per barrel during the third quarter of 2026 to about $71 by the end of the forecast period, while natural gas futures are expected to peak at just over 123 pence per therm in the fourth quarter before falling to just under 60 pence by the end of the forecast horizon.