BoE Votes 6-3 Against Rate Hike Despite Rising Inflation Fears

The Bank of England (BoE) kept interest rates unchanged, but a closely watched vote revealed that three policymakers wanted to raise them by 25 basis points.

Megan Greene, Catherine Mann, and Huw Pill argued that the longer the energy shock lasts, the greater the risk that higher prices feed into wages and domestic inflation. They expressed concern about what happens when elevated energy costs meet wage negotiations and inflation expectations.

The majority of policymakers took a different view, preferring to wait because domestic inflation pressures have not yet shown the same persistence as energy prices. The labour market remains soft, with evidence of slack in the economy that should help contain second-round effects.

The BoE's updated forecast suggests UK CPI could rise to around 3.75% in the fourth quarter of 2026 and slightly above 4% in the first quarter of 2027, largely due to higher oil, gas, and refined-product prices following the escalation in the Middle East.

The BoE will pause active gilt sales for six months while stopping sales of long-dated gilts altogether. It still intends to reduce its stock of government bonds to zero over time but has slowed down the process to run through 2034, with an average annual reduction of about £46 billion.