BoE holds for a sixth straight meeting. But a hike is now in view.

At its meeting ending on 16 September, the Bank of England's (BoE) Monetary Policy Committee (MPC) held the policy rate (Bank Rate) at 3.75%. It is the sixth consecutive hold since the cut to 3.75% in December 2025. The vote was 6–3, and the three dissenters (Megan Greene, Catherine Mann and Huw Pill) all argued for a 0.25pp increase to 4.00%.

The majority's reasoning for holding: "financial conditions will continue to work to push down on inflation, and holding Bank Rate is appropriate at this meeting." At the same time, Governor Bailey said plainly that "if the conflict in the Middle East persists for an extended period, as appears to be the case, and the risk of second-round effects emerging increases, it is likely that policy may have to tighten." Risks to the inflation outlook are tilted to the upside — and more so than at the time of the July Monetary Policy Report.

Against post-pandemic inflation, the BoE hiked 14 times in a row from late 2021. Bank Rate reached a peak of 5.25% in August 2023. As inflation cooled it began cutting in August 2024, reaching 3.75% by December 2025. Since then it has been on hold for six straight meetings, halted partway down the slope.

The easing cycle remains halted after six cuts (1.5% in total). Markets once looked for further cuts during 2026; what is priced in now is a hike instead. The market-implied path for interest rates rises to around 4.9% by the end of 2027. The question is shifting from "up or down next" to "when does it go up".

August CPI (consumer prices) rose to +3.1% year on year. The BoE now sees it reaching around 3¾% in 2026 Q4 and slightly above 4% in 2027 Q1 (the July projection was 3.2%). Energy is the main driver of the pick-up. Services CPI was +3.4%, unchanged from July and down from 4.5% in March.

Behind the price rises lies the situation in the Middle East. Compared with the time of the July Report, Brent crude is up 36% and UK wholesale gas prices up 78%, with Brent reaching $106 a barrel on 14 September. Domestic pressures, by contrast, are easing. Private sector regular pay growth (the three months to July) has slowed to 2.9% from 3.3% at the start of the year, and unemployment is flat at 4.9%. Imported price pressure against calmer conditions at home — that tug-of-war is what the 6–3 split reflects.

Rates were left on hold, but the centrepiece of the September meeting was a second decision. The MPC voted unanimously to adopt a multi-year plan to reduce to zero, by the end of 2034, the stock of UK government bonds (gilts) held for monetary policy purposes. The remaining £368bn will be unwound at an average pace of £46bn a year (of which £20bn a year through market sales, the rest through maturing gilts).

Holdings are far below their February 2022 peak, at £488bn as of 16 September. Over the past 12 months they were reduced by £70bn (of which £21bn through sales). The plan would only be reconsidered if Bank Rate alone were insufficient to meet the inflation target, or if markets were judged to be very distressed. Gilt sales also push up long-term yields, so holding the policy rate steady while continuing to tighten via the balance sheet — that combined effect is being felt in markets.

Monetary policy is set by a one-person-one-vote majority of the nine members of the Monetary Policy Committee (MPC). It comprises 5 members from within the BoE (the Governor, Deputy Governors and others) and 4 external members appointed from outside. Unlike the Fed or the ECB, a big distinguishing feature is that each member's vote is published as part of the tally.

Because of this transparency, the split itself becomes a powerful message. The run of votes goes March 9–0 → April 8–1 → June 7–2 → July 6–3 → September 6–3. The hawkish tally has stalled at three, but its substance has shifted. Among the majority who voted to hold, Clare Lombardelli said that the longer the conflict continues without resolution, the stronger the case for raising Bank Rate, while Sarah Breeden and Dave Ramsden also referred to a hike on certain conditions. Voices leaning toward a hike are spreading even within the "hold" camp. The minutes are published at the same time, letting readers see the substance of the debate.

The MPC meets eight times a year. At the February, May, August and November meetings, it publishes a Monetary Policy Report (MPR) setting out detailed economic projections. This decision was published on 17 September. The next is on 5 November (with an MPR).

Decisions are published at noon UK time, together with the minutes. At the next meeting on 5 November, a new Monetary Policy Report (MPR) will also be published, updating the inflation projections. With CPI heading toward around 3¾% by the end of the year, any early sign of second-round effects would make a hike considerably more real. The Committee has also said it would not be appropriate to wait too long for evidence of second-round effects.

Sterling is one of the major currencies, and BoE rates move the pound's exchange rate. After the hawkish hold, the pound held firm against the dollar and the euro. UK rates are the second-highest among major economies, behind the US, drawing in yield-seeking money while also weighing on borrowers through mortgage costs and the like.