BoE Keeps Rates Unchanged as Hawkish Tone Emerges Amid Inflation Concerns

The Bank of England kept its benchmark interest rate unchanged at 3.75% on Thursday, as expected, but the emergence of a third policymaker calling for higher borrowing costs signaled growing concern over inflation risks.

The Monetary Policy Committee (MPC) voted 6-3 to leave the Bank Rate at 3.75%, with policymakers choosing to wait for more evidence on the inflation outlook despite rising energy risks and AI-related supply constraints.

Policymakers Megan Greene, Huw Pill, and Catherine Mann voted in favor of a 25-basis-point increase, arguing that inflation risks remain elevated despite recent improvements in headline price growth. They pointed to ongoing uncertainty surrounding global energy markets and the potential for another round of inflation due to supply shocks.

The Bank said all committee members agreed that risks to energy prices remain skewed to the upside, reflecting continued uncertainty stemming from geopolitical tensions and global supply disruptions. Greene warned that fresh supply shocks could prolong price pressures, highlighting the importance of monitoring developments in the artificial intelligence industry alongside traditional inflation drivers.