- The Bank of England’s Monetary Policy Committee (MPC) voted to keep interest rates at 3.75% today.
- Though a majority of the nine-person committee voted to keep hold rates, a growing number are now voting for rates to rise.
- The latest decision is a continuation of the MPC’s ‘wait and see’ approach to setting rates, holding off on a hike or cut until we see concrete evidence of how the war is affecting the UK.
- Inflation is expected to peak at 3.2% in the final quarter of 2026, according to the Bank’s latest forecast.
When will interest rates fall further? | Is the UK heading for stagflation? | MPC meeting dates | UK inflation forecast |
Hello and welcome to MoneyWeek’s live coverage of tomorrow’s interest rates decision.
Follow our reporting on this page for the latest commentary, analysis and breaking news ahead of the Bank of England’s Monetary Policy Committee announcing their interest rates decision tomorrow afternoon.
What is the Monetary Policy Committee (MPC) and what happens at their meetings?
The Monetary Policy Committee (MPC) is a group of nine experts appointed by the Bank of England responsible for setting interest rates.
The committee is made up of five senior Bank of England staffers and four external experts who are directly appointed by the chancellor.
The MPC members from the Bank include governor Andrew Bailey, deputy governors Dave Ramsden, Clare Lombardelli, Sarah Breeden, and the Bank’s chief economist Huw Pill.
The external experts are selected to ensure the Bank benefits from outside expertise from academia and industry. They include Alan Taylor, Catherine L Mann, Megan Greene, and Swati Dhingra.
A representative from the Treasury is also present. They are allowed to speak about policy ideas, but are not allowed to vote.
The MPC meets every six weeks to vote on whether to cut, hold, or raise interest rates and each vote has equal weight. The governor of the Bank votes last and has the deciding vote in the case of a tie.
Interest rate decisions are usually announced on a Thursday, though the meeting itself typically takes place on the day before the announcement.
At their last meeting, the MPC voted to hold rates at 3.75%, with the motion passing by seven votes to two.
Where have interest rates gone recently?
In the last six years, interest rates have gone from being as low as 0.1% to as high as 5.25%. Much of this period is dominated by the covid-19 pandemic and its consequences.
When the pandemic first hit, the MPC decided to push rates down to 0.1% to help stimulate economic activity.
Then, when the economy opened back up and the cost of living crisis began to be felt, interest rates were repeatedly hiked to combat rising inflation.
More recently, the Bank of England started to cut interest rates. Between August 2024 and December 2025, the MPC voted to cut interest rates six times, each time by 0.25 percentage points.
This gradually brought the Bank rate down to 3.75% in the last MPC meeting of 2025.
At the end of 2025, most experts believed that interest rates would be brought down by another 0.5 percentage points by the end of 2026, settling at around 3.25%.
However, the Iran war made the MPC change course. Since the war began on 28 February, the MPC has kept rates on ice at 3.75%, adopting a “wait and see” approach to future rate movements.
What should you expect from tomorrow’s MPC meeting?
Most experts agree that the MPC is most likely to hold interest rates at 3.75% tomorrow as the impact of the Iran war on the UK economy is still uncertain.
The current economic data is inconclusive about the long-term impact of the Iran war on the UK. Although inflation figures have been lower than expected so far, inflation is still forecast to rise in the final quarter of the year.
This makes it very difficult to justify lowering interest rates, as a cut would likely mean fuel a rise in inflation, when it is already forecast to increase..
On the other hand, raising interest rates presents its own challenges. A rate hike would hamper economic activity as borrowing becomes more expensive.
With the lack of conclusive economic evidence about how the UK is being affected by the Iran war, the Bank of England believes a ‘wait and see’ approach is the best one. The MPC is awaiting concrete data with which they can confidently assess the impact of interest rate changes before they bring any in.
This is why most experts believe the MPC will hold interest rates at 3.75% tomorrow – there isn’t enough data to justify a rate hike or cut at the moment.
Where is inflation, and where will it go this year?
Inflation is one of the key economic metrics used by the MPC to help decide whether to move interest rates.
The Bank of England has a mandate to keep inflation at 2% in the medium term, so when inflation is too high, rates tend to be hiked. When inflation is too low, rates tend to be lowered.
Inflation in the UK has been mostly above the 2% target since July 2021, though at points it has briefly been at or below the target.
The most recent set of inflation data shows inflation dipped to 2.6% in the year to June, down 0.2 percentage points from the previous month.
Price growth has broadly been falling since September 2025, but the Iran war has meant most forecasters expect it to rise in the final quarter of this year.
Estimates by the Bank of England, published on 18 June, shows inflation is expected to stay just under 3% for most of 2026 before rising to a “little over” 3.25% in the final quarter of the year.
The Bank of England is set to release a new inflation forecast tomorrow.
What is the economic background of this month’s decision?
Alongside inflation, the MPC also looks at other economic metrics to help inform their decisions. One key measurement is the state of the labour market.
In the orthodox view of economics, a poorly-performing labour market pushes down inflation as higher unemployment and slow wage growth means people have less money to spend. With lower demand, prices fall.
The latest labour market data, published on 21 July, showed unemployment remained at 4.9% in the three months to May for the second month in a row, the highest level it has been for six years.
Meanwhile, regular wage growth also remained at a six-year low. Regular earnings held at 3.4% in the three months to May, rising to 4.3% when including bonuses.
The UK economy is also growing very slowly. GDP growth in the month to May was just 0.1%, reversing a 0.1% drop in GDP in the month prior.
Deutsche Bank: MPC expected to vote to hold rates by 7 to 2
Interest rates are set to stay at 3.75% at tomorrow’s interest rates announcement, according to predictions from Deutsche Bank.
The bank expects that, despite worries of second-round inflation effects from energy price hikes, the MPC will keep the Bank rate unchanged.
They expect the MPC to keep rates at 3.75%, with seven members voting to hold and two voting to raise rates.
The two dissenters are expected to be BoE chief economist Huw Pill and external member Megan Greene – the same two who voted to hike rates at the last MPC meeting.
Sanjay Raja, chief UK economist at Deutsche Bank, said: “We expect the Bank of England to remain on the sidelines for the rest of the year. But there are clear risks to our call.
“A second energy wave will likely amplify uncertainty around the inflation path and the risk of second-round effects. We see upside risks to the interest rate outlook in the near term, with much dependent on the duration of the unfolding energy shock.”
Hold tomorrow may be ‘calm before storm’ with potential rate hikes later this year
While most experts agree that rates are unlikely to change tomorrow, where they go next is less certain.
The market is currently pricing in rate hikes later this year as the Bank deals with the economic fallout from the Iran war.
Hikes would hurt borrowers as the cost of credit, like loans and mortgages, will become higher.
Harriet Guevara, chief savings officer at Nottingham Building Society, said: “The Bank is almost certainly going to hold at 3.75% on Thursday, but that should not lull anyone into thinking the hard decisions are behind us.
“Inflation remains above the Bank's 2% target, energy bills went up 13% at the start of July, and the conflict in the Middle East continues to push up oil and gas prices. Put all of that together, and markets are now pricing in one to two rate rises before the end of the year, meaning that a hold this month could be the calm before the storm.”
She added that while higher rates will mean mortgage rates are likely to rise, the silver lining is that savers will be able to enjoy higher interest rates on their savings – so long as they make sure they are getting the best rate.
Thank you for following our live report today.
Come back tomorrow morning for the latest news, analysis, and commentary on the MPC's interest rates decision.
Good morning and welcome back to our live coverage of today’s interest rates decision.
The Bank of England’s Monetary Policy Committee will announce whether they have voted to raise, lower, or hold interest rates at 12pm today.
Follow this page for the latest news, analysis and commentary.
RECAP: What are we expecting today?
The MPC will reveal their interest rates decision at midday today, and it is almost certainly going to be a hold.
Most experts believe keeping interest rates at 3.75% will buy time for the MPC to properly assess where rates should go in response to the economic shock of the Iran war.
Though inflation has slowed or stayed the same since March, the Bank of England estimates that price growth will accelerate in the final quarter of this year, meaning interest rate cuts are very unlikely.
When the decision is revealed, the Bank will publish the minutes from the MPC meeting and a monetary policy report which includes detailed models for where the UK economy is going next.
What would it take for the MPC to raise interest rates?
Although the MPC is widely expected to keep rates on ice today, analysts have warned that we may see rate hikes later this year, largely because of the UK’s inflationary outlook.
Inflation is likely to rise in the last quarter of 2026, with the Bank of England estimating in June that it could reach 3.25% by the end of the year. New forecasts will be published today.
In particular, experts have warned that energy inflation will be one of the most important metrics to look out for.
The UK is especially vulnerable to energy price shocks because it is a net importer of energy. This means that households are mostly at the mercy of the market – as can be seen in the past few months when fuel prices soared because of the war in Iran.
Although economists at Deutsche Bank expect the Bank rate will remain at 3.75% for the rest of this year, they do see a risk of a hike if the energy price shock is more persistent than currently forecast.
Sanjay Raja, chief UK economist at the bank, said: “A second energy wave will likely amplify uncertainty around the inflation path and the risk of second-round effects. We see upside risks to the interest rate outlook in the near term, with much dependent on the duration of the unfolding energy shock.”
The BoE’s three central inflation forecasts
At the MPC’s April meeting, the Bank of England outlined three central scenarios for where they think inflation could go next in the wake of the Iran war.
In scenario A, the Bank forecast inflation would peak at 3.6% this year. This scenario assumed oil and gas prices would rise, following the implied paths of the market in the 15 days to 22 April, and did not expect second-round inflationary effects.
The assumptions behind scenario B were not much different, only adjusting the length that energy prices will be elevated. Second-round effects were assumed to be modest, pushing up their prediction to 3.7%.
The worst-case scenario C set out in April was much more dramatic. It expected a sharp and prolonged rise in energy prices that would lead to much stronger second-round effects than the ones modelled in scenario B.
In this scenario, inflation would peak at 6.2% at the start of 2027 before starting to fall again.
Inflation has, so far, thankfully surprised to the downside, meaning that the risk of scenario C is low, but MPC member Dave Ramsden said in June that he still thinks scenarios A and B could materialise after the summer.
What do interest rates mean for your finances?
What the MPC decides will have an impact on your personal finances.
Falling interest rates could mean you have more money in your pocket each month, while rising rates could add more pressure to your household budget.
The Bank of England’s base rate (or Bank rate) is the core interest rate in the UK, and is the rate of interest the BoE pays to financial institutions that hold money with the central bank.
When interest rates are lowered, savings accounts offered to customers typically become less competitive, but loans become cheaper. And when rates are hiked, loans become more expensive, but savings accounts pay higher interest.
These movements do not necessarily all happen at once – lenders tend to change their interest rates in anticipation of the MPC’s next decision.
For example, since the start of the Iran war, average savings rates have increased despite no movements in the Bank rate. They are an average of 3.59% today, up from 3.32% a day before the war broke out.
Bank of England to announce rates decision in 10 minutes
The MPC’s latest interest rates decision will be announced at midday, in about 10 minutes.
Stay tuned on this page for the breaking news and key insights from the meeting’s minutes and Monetary Policy Report.
BREAKING: Interest rates held at 3.75%
Interest rates have been held at 3.75% after the Bank of England revealed the MPC’s latest decision.
It is the fifth consecutive meeting where rates were kept on ice.
MPC voted 6 to 3 in favour of holding rates
The Monetary Policy Committee held rates at 3.75% with six members voting to hold and three members voting to hike rates by 0.25 percentage points to 4%.
The three dissenting members of the committee were external members Megan Greene, Catherine L Mann, and the BoE’s chief economist Huw Pill.
Meanwhile, members who voted to keep rates at 3.75% were governor Andrew Bailey, deputy governors Sarah Breeden, Dave Ramsden, Clare Lombardelli, and external members Alan Taylor, and Swati Dhingra.
Bank of England MPC: Energy prices set to push inflation up this year
High energy prices due to the Iran war are set to push inflation up this year, according to the Bank of England’s latest forecast.
The Bank’s central projection now expects inflation to peak at around 3.2% in the final quarter of 2026, slightly lower than their previous estimates.
The minutes of the latest MPC meeting said: “CPI inflation has fallen to 2.6% since the previous meeting, although it is expected to rise later this year as the effects of higher energy prices continue to pass through.
“The risk of material second-round effects in price and wage-setting, against which policy needs to lean, is greater the longer higher energy prices persist. There is little evidence so far to suggest such effects, and there have continued to be clear signs of underlying disinflation in recent data."
Inflation outlook remains dominated by Iran war
Where inflation will go next remains contingent on the war in Iran, according to the minutes of the MPC’s latest meeting.
It said: “The conflict in the Middle East, and its impact on energy prices and the UK economy, remained the dominant source of uncertainty for the inflation outlook.”
The minutes added: “Policy would need to guard particularly against second-round effects that created inflation persistence, while considering any trade-off with weaker economic activity. The risk of material second-round effects would depend on the scale and duration of the energy shock, which remained uncertain.”
Andrew Bailey: Rates were held due to conflict in Middle East
Andrew Bailey, the governor of the Bank of England, has explained the key reasons why the MPC decided to hold rates today.
He said: “Today we’ve held [the] Bank Rate at 3.75%. Inflation has fallen faster than we’d expected, but the conflict in the Middle East continues to mean high and volatile energy prices. That will cause inflation to rise again later this year.
“However the conflict unfolds, our job is to make sure any increase in inflation is temporary and that it comes back to our 2% target.”
Other global factors also pose an inflation risk
Though the energy shock is one of the most important factors in the expected increase in global inflation, there are other headwinds.
The MPC meeting minutes said: “Global factors pointed to an economic environment that risked being more inflationary in future.”
These included the strong demand for AI-related components (like semiconductors and data centres) that have created sector-specific price pressures and the impact of the El Niño climate phenomenon on global food prices.
The minutes added: “While these risks might not materialise, or occur at the same time, the Committee noted that some could interact with one another and with commodity price developments in potentially inflationary ways.”
Future interest rates decisions could need to react before conclusive inflation data
The MPC indicated that their future interest rates decisions may need to be more preemptive if the inflation forecast worsens.
The minutes said: “Members noted that monetary policy could need to react before the risks around inflation persistence materialised conclusively.
“There were two dimensions in considering the appropriate policy stance: the level of current monetary policy restrictiveness, and the degree to which policy should guard pre-emptively against the possibility of worse outcomes. Both considerations involved balancing the costs of leaning too little against inflation persistence against costs to economic activity by leaning too much.”
Why three MPC members voted to hike rates
Today’s MPC decision was more split than any vote since the start of the Iran war. Three members voted to hike rates to 4% instead of holding them.
In the previous meeting, two members voted for a hike, and in the meeting before that only one voted to raise rates.
The growing split indicates that there is increasing pressure within the MPC to hike rates in order to deal with rising inflation.
Catherine L Mann, who voted for a hike for the first time since the war began today, justified her vote by saying: “The key change in the environment for my decision is the collapse of the US-Iran Memorandum of Understanding, the widening of the Middle East conflict, and the associated volatility in energy prices. This ‘sporadic continuance’ of the conflict that I hypothesised last month appears to be the state of play.”
Megan Greene justified her vote to raise rates by saying: “As in June, there is significant uncertainty about which projection or scenario is most likely and I believe a risk management strategy is appropriate
“Staff analysis illustrates that setting policy as if there are stronger second-round effects and course correcting if they prove to be smaller is less costly than vice versa. Furthermore, a proactive hike in Bank Rate may reduce the probability that second-round effects set in.”
Finally, Huw Pill said he voted to hike rates because: “While energy prices remain volatile, risks to achieving the inflation target lie firmly to the upside.”
He added that he was concerned about the possibility of second-round effects “driven by catch-up dynamics in wage and price setting.
“While these may be slower to emerge, they could prove more lasting and create greater intrinsic inflation persistence.”
He called for the MPC to raise rates in order to “offer a clear and unambiguous signal of our willingness and ability to address upside risks to inflation stemming from events in the Gulf. This would place us in the best position to manage risks to the inflation target as they emerge.”
Rates decision was “fully expected” but uncertainty among members is increasing
Ed Hutchings, head of rates at Aviva Investors, said that while today’s interest rates decision was fully expected, “going forward it remains apparent that a lot of uncertainty amongst MPC members exists.
“How this plays out is far from clear and although recent employment and inflation data has been of some comfort, investor attention and the Committee’s focus is likely to be on risks around the outlook ahead, and particularly so from an inflation standpoint.”
He added that he expects the MPC to remain in ‘wait-and-see’ mode to assess the impact of the Iran war, and noted that markets are now pricing in a 0.6 percentage point hike in interest rates.
“Yet, even if the BoE do hike, the question will be how much further this can go and with gilt yields around 5%, it’s arguable that over the medium-term value is being created.”
Rate hold slows cash ISA price war
News that interest rates have been held at 3.75% have cooled a price war among several fintechs who increased savings rates in expectation that rates would rise today.
Kate Steere, personal finance expert at Finder, said: “The expectation ahead of last week’s inflation figures was that the Bank of England could raise rates, prompting several fintech providers to battle it out in a cash ISA rate war.
“However, with inflation coming in lower than expected and today’s decision from the Bank to hold the base rate, those rates have settled and edged back down.”
She noted that while this may be disappointing for savers trying to get the best rates, they “shouldn’t miss the bigger picture: real returns are back.
“With inflation at 2.6%, market-leading cash ISAs are offering returns nearly 2% above inflation. That means cash value isn't just being protected from inflation - it's actively growing.
"With rates already dropping slightly, now is the time to take advantage before these strong offers slip away."
Recap: Where interest rates have been in the last 10 years
Today’s interest rates decision marked the fifth consecutive time the MPC voted to hold the Bank rate at 3.75%.
Though the base rate is high compared to where interest rates were between 2008 and 2022, a rate of 3.75% is actually the lowest since early 2023.
Rates started to rise once the economy opened up after the covid-19 pandemic when inflation started to rise during the cost of living crisis.
They stayed high, peaking at 5.25% before starting to fall in November 2024.
BoE: UK economy set to remain subdued this year, but accelerate in 2028
The energy shock is set to keep the UK economy “subdued” for the rest of 2026 and early 2027, the Bank of England has said.
New forecasts from the Bank’s quarterly Monetary Policy Report show annual UK GDP is set to rise by 1.1% in the third quarter of 2026 and 2027, and increase by 1.7% in the third quarter of 2028.
Santander: Tracker mortgages becoming more popular as customers hope for rate cuts
“Cautious optimism” is entering the mortgage market as an increasing number of borrowers are choosing tracker mortgages as they hope for future interest rate cuts, according to Santander.
Tracker mortgages track the Bank of England’s base rate (the rate is usually set a little above this benchmark) and can change during the mortgage term. They are different to fixed-rate mortgages where borrowers lock into a certain rate for a fixed period of time.
Frances Haque, chief economist at Santander UK, said: “Although both global and domestic challenges remain, there certainly seems to be signs of cautious optimism trickling into the mortgage market.
“More borrowers are choosing to play the waiting game, with growing interest in tracker mortgages as customers hope to benefit from any future reductions in borrowing costs.”
Mortgage rates not set to fall any time soon
Although interest rates have been held at today’s meeting, the market is still expecting rates to rise later this year, meaning mortgages are not set to become cheaper any time soon.
Adam French, head of consumer finance at Moneyfacts, said: “Mortgage costs were already on the up before today’s decision to hold the Base Rate at 3.75%, with more than 30 lenders increasing rates in recent weeks.
“While the initial market reaction has been fairly muted, it remains to be seen whether the slightly more hawkish tone struck by the MPC fires the starting gun on a fresh wave of mortgage rate hikes.”
French added: “Unless the economic backdrop improves significantly, borrowers should not expect mortgage rates to fall much anytime soon.
“Anyone planning to take out a mortgage within the next six months should consider securing a deal sooner rather than later to protect themselves against further increases. If rates do fall before their mortgage completes, they can usually switch to a cheaper deal.”
Deutsche Bank: Unexpectedly slow inflation is helping buy the MPC time
With inflation surprising to the downside for the last few months, the MPC has been given more time to assess whether or not hiking rates is the right decision, Deutsche Bank says.
Sanjay Raja, chief UK economist at Deutsche Bank, said: “It’s clear that recent inflation and wage outturns have given the broader MPC confidence that underlying disinflation has continued.
“Multiple members pointed to a loose labour market, target-consistent private-sector pay growth and the absence of evidence that inflation expectations, wage settlements or firms' pricing behaviour are generating meaningful second-round effects. This, in and of itself, buys the MPC more time.”
He added that pressure to hike rates has also been relieved as markets have already priced in higher shorter-term and longer-term interest rates, because of the subdued labour market.
Deutsche Bank’s prediction remains that the Bank rate will stay at 3.75% for the rest of the year, but their forecast is highly dependent on what happens in the Middle East.
Raja said: "The longer tensions in the Middle East continue, the higher the risk of a policy shift in the coming months. Indeed, should energy prices drift further, extending the duration of the price shock across energy futures, the balance of risks could quickly shift towards a tightening cycle as opposed to a protracted pause.”
Rate hold leaves property market in “limbo”
The poorly-performing UK property market is unlikely to be given a boost following today’s interest rates announcement as lower mortgage rates are off the table.
Ryan Etchells, chief commercial officer at property lender Together, said: “Another hold by the Bank of England – the fifth in a row – leaves the property market in limbo for now.
“For UK mortgage borrowers, the context of the hold is somewhat more negative than at the last. Reignited tensions in the Middle East have raised expectations of a rise in inflation, which could lead to at least one Bank of England rate hike this year.”
Etchells added that the possibility that rates may rise this year could incentivise buyers to lock in rates now before they become less attractive, but warned many will also decide to wait and see if the situation improves in the short term before going ahead with securing a home loan.
Oxford Economics: Rates to stay at 3.75% until at least the start of 2027
Interest rates are unlikely to change for at least the rest of this year, Oxford Economics has reiterated following today’s MPC meeting.
The economics advisory firm has stuck with its forecast that rates will remain on ice until at least early 2027, noting that there is no evidence yet of second-round effects from elevated energy prices.
Andrew Goodwin, chief UK economist at the firm, said: “Members pointed out that this isn’t guaranteed to remain the case, but provided forward-looking indicators are benign, the majority think policy is already sufficiently restrictive.
“The MPC downplayed the extent to which the rising path in market rates implies tightening is likely, arguing that it mainly reflects risk premia rather than expectations that Bank Rate will rise.”
This being said, Goodwin warned: “The conflict in the Middle East is still the wildcard that could trigger a change of view. Several members suggested a sustained period of higher energy prices would raise the chances that second-round effects would develop.”
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