BoE Maintains Bank Rate at 3.75% Amid Subdued Economic Activity

Bank of England Governor Andrew Bailey explained the decision to maintain the bank rate at 3.75% in a 6-3 vote split following the July monetary policy meeting, citing subdued UK economic activity and a soft labour market.

No evidence has been found of second-round effects from inflation, which was seen as a key factor in previous decisions, but Bailey emphasized that this cannot be taken as comfort.

The BoE is prepared to adjust its stance as new evidence emerges, with the expectation that indirect inflation effects will add 0.5 percentage points to inflation in H2-2026.

Household inflation expectations have fallen, but remain elevated, while weak demand limits the pass-through of higher costs to prices, according to Bailey.