Summary
- The Bank of England’s Monetary Policy Committee (MPC) announced interest rates will be held at 3.75% today
- The move was in line with most expert forecasts
- The Bank of England warned that inflation is likely to rise even higher, overshooting their previous expectations
- The latest inflation data showed prices rose by 3.1% in the year to August 2026, up from 2.9% in July.
When will interest rates fall further? | Is the UK heading for stagflation? | MPC meeting dates | UK inflation forecast |
Hello and welcome to our interest rates live report. The Bank of England’s Monetary Policy Committee (MPC) will announce their latest base rate decision tomorrow.
Stay tuned on this page for the latest news, analysis and commentary leading up to tomorrow’s announcement.
When will the interest rates decision be announced?
The latest interest rates decision will be announced tomorrow (Thursday, 17 September) at 12:00pm.
The minutes of the MPC’s meeting will be released at the same time. MoneyWeek will report on the breaking news as it comes.
The interest rates meeting itself usually takes place the day before the MPC’s announcement, meaning the MPC will be able to make its decision with the latest inflation data released this morning.
What is the Monetary Policy Committee?
The Bank of England’s Monetary Policy Committee (MPC) is the body that is responsible for setting interest rates..
The committee is made up of nine members and is chaired by BoE governor Andrew Bailey.
Five of the members are internal staff, while the remaining four are external experts appointed to make sure the MPC benefits from expertise outside the Bank of England.
The internal members are governor Andrew Bailey, deputy governors Sarah Breeden, Clare Lombaredelli, Dave Ramsden, and chief economist Huw Pill.
The external members are Alan Taylor, Catherine L Mann, Megan Greene, and Swati Dhingra.
During each meeting, the committee votes on whether to cut, hold or raise interest rates.
What to expect from tomorrow’s interest rates announcement
Most experts expect that interest rates will be held at 3.75% tomorrow as the MPC remains in “wait-and-see” mode.
However, with the latest inflation data showing prices grew by 3.1% in the year to August, pressure to hike rates to respond to rising inflation is likely to grow among the MPC members.
Sanjay Raja, chief UK economist at Deutsche Bank, said: “We don’t expect any change to Bank Rate, with the MPC likely to remain on the sidelines relative to other central banks. But we do think the tides are turning on the inflation backdrop.
“Higher energy prices are here to stay for longer than expected. Inflation is no longer missing to the downside as it did throughout Q2-26. The economy has been far more resilient than the BoE envisaged. The labour market is showing some signs of stabilisation. And risks around wage settlements remain skewed to the upside.
“Put simply, we think the MPC’s patience may be running thin. And the case for staying on hold is weakening slowly.”
Recap: Where did inflation go in August?
Inflation rose to 3.1% in August, the latest data from the Office for National Statistics (ONS) shows.
The main driver was a sharp rise in the price of fuel which pushed price growth higher in August. Other contributing sectors were higher airfares, housing and household services, and recreation and culture.
Grant Fitzner, chief economist at the Office for National Statistics, added that rising crude oil and petrol prices increased the cost of raw materials and price of goods leaving factories.
Some of the rise was offset by a fall in furniture and household good prices and clothing and footwear prices.
Why do some MPC members want to raise interest rates?
At the MPC’s last meeting on 30 July, three of its nine members voted to raise interest rates by 0.25 percentage points.
The members were BoE chief economist Huw Pill, and external members Megan Greene and Catherine L Mann.
Although they all had a slightly different rationale, they all believe that raising interest rates now will do a better job of protecting the UK from inflation if the inflationary shock is worse than expected, considering how volatile the economic outlook is.
Pill explained his reasoning last week, warning that the “wait-and-see” approach the Bank is currently taking will not stave off inflation if price growth is worse than the Bank’s current predictions.
He said the current approach of keeping rates at 3.75% means the Bank of England may fall “fall ‘behind the curve’ in addressing emerging inflationary risks” if the economic damage from the Iran war is more substantial than expected.
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 cut rates 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 hiked consecutively from December 2021 to August 2023 to combat rising inflation.
More recently, the Bank of England started to ease 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, rates have been on ice at 3.75%, although pressure is growing to raise rates.
What is the bank rate and why is it important?
When we talk about the BoE raising or cutting interest rates, this refers to the ‘bank rate’, or the ‘base rate’.
The bank rate is the core interest rate in the UK, and is the rate of interest the BoE pays to commercial banks, building societies, and financial institutions that hold money with the central bank.
The bank rate is also the interest rate that the central bank charges on loans made to other financial institutions, therefore affecting their own lending and savings rates.
The reason the BoE moves interest rates is typically to achieve certain economic goals for the country. The most important of these, but not the only one, is achieving the bank’s target inflation rate of 2%.
Broadly speaking, when inflation is too high, interest rates will be raised in order to rein in consumer spending and push down demand.
For example, this may mean your mortgage payments increase and you therefore have less money to spend elsewhere. Meanwhile, people are also encouraged to save more money as higher interest rates are offered on savings accounts.
On the other hand, interest rates may be lowered in order to try to stimulate the economy and encourage people to spend more – mortgage payments will be lower and savings rates will be far less appealing.
This may be done when inflation is below target, but could also be done to bring the base rate back down to a neutral level.
The economic data the MPC will be looking at
The MPC uses a suite of economic data to help inform its interest rates decisions.
The most important of these metrics is inflation, as the Bank of England has a mandate to keep inflation at the 2% target. If price growth is too high, rates might be hiked, and if it’s too low they may be lowered.
Another key metric is the state of the labour market. A softer labour market with higher unemployment and poor wage growth is a disinflationary pressure in the economy, while strong wage growth and full employment drives up inflation.
The latest set of labour market data, published on 15 September, showed unemployment held at 4.9% in the three months to July for the fourth month in a row.
At the same time, regular wage growth was at a near-six-year low. Regular earnings grew by 3.5% in the three months to July, rising to 3.9% when including bonuses.
This was led by the public sector, where wages grew by 6.3% in the three months to July while private sector earnings grew by just 2.9% in the same period.
Meanwhile, the UK economy grew by 0.4% in the three months to July.
Oxford Economics: Another 6-3 vote split expected
Economics advisory firm Oxford Economics expects the MPC to vote to hold interest rates at 3.75%, with a 6-3 vote split.
The three voting for a hike are expected to be the same MPC members who voted to hike rates in the previous meeting: Huw Pill, Megan Greene, Catherine L Mann.
Alexander Harvey, an economist at the firm, said: “Huw Pill reiterated his call for a prompt rate hike now to pre-empt any second round effects and prevent more aggressive tightening in the future.
“Elsewhere, Catherine Mann signalled that she’s likely to vote for a hike again. Speaking on a podcast, she said that the UK economy is showing healthier signs on growth and the labour market since the last meeting and stated her view that it’s better for Bank Rate to be slightly too high and then correct than be too low. Given this, we think she’s likely to stick with her vote to hike.
“At the Treasury Select Committee meeting on September 8, Governor Bailey, Megan Greene, Sir Dave Ramsden, and Alan Taylor largely reiterated their positions from July.”
Thank you for following our live report before tomorrow’s interest rates decision.
We are going to pause our coverage for now, but join us again tomorrow morning when we will be reporting on the latest interest rates news, analysis, and commentary.
Good morning. Welcome back to our live report on today’s Bank of England base rate announcement.
The Bank of England will reveal the Monetary Policy Committee’s latest interest rates decision today, so stay with us on this page for breaking news and analysis.
Recap: What you should expect from today’s decision?
The Monetary Policy Committee’s (MPC) latest interest rates decision will be announced at 12pm today.
Most experts think interest rates will be held at 3.75% again, as the Bank continues its “wait-and-see” approach to ratesetting.
However, with inflation reaching 3.1% in the year to August, pressure to raise rates is growing within the MPC.
Of the nine members of the MPC, six are expected to vote to keep rates at 3.75%, and three are expected to vote to raise rates to 4%.
Deutsche Bank: Confidence that rates will be held at 3.75% for 2026 has fallen
Deutsche Bank expects the MPC will vote to keep rates at 3.75% tomorrow and for the rest of the year, but has less conviction in this forecast.
With inflation coming in higher than the Bank of England’s forecast, the chances that we will return to a cutting cycle are much lower.
Sanjay Raja, chief UK economist at Deutsche Bank, said: “We expect the MPC to remain on hold for the remainder of the year. But as we’ve expressed recently, our conviction levels around this call have fallen.
“Policy rules all point to some modest tightening given the upward pressure on inflation. Wage pressures may also be firming a touch. Some fiscal easing looks likely in the coming Budget. We will be watching closely where pay settlements land in the coming months.
“Further out, we tweak our forecast for rate cuts next year. We no longer expect the BoE to resume any rate cuts until 2028, with the path to nominal neutral likely to take longer than we previously anticipated.”
Why the Iran war is impacting the UK economy
The MPC cut interest rates six times between August 2024 and December 2025, and most experts believed this cutting trend would continue in 2026 as inflation eased.
However, once the Iran war broke out on 28 February, these forecasts were revised.
The war led to the Strait of Hormuz, a narrow waterway between Iran and Oman through which around 30% of the world’s oil is transported, being shut which in turn led to a surge in the price of oil, gas, and wholesale energy.
Higher raw oil, gas, and energy prices mean higher prices for many everyday items we consume in the UK. For example, as oil is used in the production of petrol and diesel, motor fuel prices have soared.
Meanwhile, as the wholesale cost of energy has increased, the price of heating your home has increased too. The Ofgem energy price cap rose by 13% in July, and will rise by a further 4% in October.
These price hikes have contributed to the acceleration in the UK inflation rate, and as the Bank of England has a mandate to keep inflation at 2%, it may intervene by moving interest rates.
So far, the MPC has chosen not to change rates in the face of the economic shock from the Iran war, but pressure to hike rates in response is growing.
How does the Bank of England’s interest rate decision affect you?
When the Bank of England moves interest rates, savings, mortgage, and annuity rates typically move too.
This is because the bank rate is what the BoE charges on loans made to other financial institutions, which has a knock-on effect on consumer products.
Base rate movements will generally translate into a similar movement in mortgage rates, although this isn’t always the case as the wholesale cost of borrowing for banks and lenders (swap rates) are typically used to determine mortgage rates.
That means that if the base rate is held, but most lenders believe it will rise later in the year, mortgage rates may move now in anticipation of a future interest rate hike.
If you have a tracker rate mortgage, the interest rate you pay is directly related to the Bank rate, as your mortgage rate will typically be the Bank rate plus a few percentage points and it will change when the Bank rate changes.
For savings, it’s a little more straightforward. When the base rate moves up, savings rates typically move with it, and when the base rate goes down, savings rates will usually follow.
Annuity rates tend to be better when the base rate is higher, and worse when the base rate is being cut. This is because annuity rates are linked to UK government bond yields, which are in turn linked to the Bank of England base rate.
Interest rates decision to be announced in 5 minutes
The Bank of England will announce the MPC’s latest interest rate decision at midday, in around five minutes.
Stay on this page to get the breaking news as soon as we get it, as well as expert analysis and commentary.
BREAKING: Interest rates held at 3.75%
Interest rates will remain at 3.75% as the Bank of England’s Monetary Policy Committee voted to hold rates.
A hold was widely expected by economists.
MPC vote to hold rates by 6-3
The members of the MPC voted to hold interest rates, with a vote split of 6-3.
The members who voted in favour of holding rates were: Andrew Bailey, Sarah Breeden, Swati Dhingra, Clare Lombardelli, Dave Ramsden and Alan Taylor.
The three remaining members voted to increase the base rate to 4%. They were: Megan Greene, Catherine L Mann, and Huw Pill.
All members voted in the same way they did in July’s meeting.
Bank of England: Inflation will likely rise even higher
The Bank of England believes inflation will rise even higher than 3.1% as the UK contends with higher energy prices.
The minutes of its most recent MPC meeting said: “Inflation has risen to 3.1% and we think it will go up even more as higher energy prices have their knock-on effects; higher bills could force businesses to increase their prices to cover the cost, for example.
“So far, there is little evidence of significant knock-on effects on prices and wages; but the risk of them occurring and having a longer-term impact on the economy increases the longer energy costs stay high.”
Weak labour market and high borrowing costs are containing inflation
The poor state of the labour market in the UK and high mortgage and borrowing rates are helping stave off inflation, the Bank of England has said.
“Mortgage rates for households and borrowing costs for firms are higher than before the conflict, making people more cautious about spending; there are also more people looking for work than jobs available, so employers may feel less pressure to increase salaries.
“For now, this seems to be containing the effects of energy price rises and keeping overall inflation from going up as much.”
BoE: UK inflation is being driven by higher energy prices
UK inflation is currently 3.1%, 1.1 percentage points above the Bank of England’s 2% target. This is largely due to high energy prices, according to the Bank of England.
The minutes of the latest MPC meeting said: "Around 0.7 percentage points of the 1.1 percentage point overshoot relative to the 2% target was driven by the direct effects of energy prices, mostly motor fuels.”
They added that the impact of energy prices on inflation is likely to increase in the near to medium term.
“Based on energy prices as at close of business on 14 September, the direct contribution of energy prices to inflation was expected to increase over coming quarters, reflecting recent further increases in wholesale oil, gas and electricity costs.
“Ofgem’s headline energy price cap for October to December would be increased to £1,723, somewhat higher than expected at the time of the July Report, and the cap was now expected to rise substantially further in 2027 Q1, all else equal.”
Inflation set to reach 4% at start of 2027
The Bank of England has revised its inflation forecast, now expecting price growth to reach 3.75% by the end of 2026, and edge higher to just above 4% at the start of 2027 due to rising energy prices.
The latest MPC meeting minutes said: “Based on energy prices as at close of business on 14 September, CPI inflation was expected to increase to around 3.75% in 2026 Q4, compared with 3.2% at the time of the July Report, and to reach slightly above 4% in 2027 Q1.”
Food inflation is undershooting Bank expectations
While increased energy prices are pushing inflation higher in the UK, firms do not seem to be pushing the increased costs onto consumers.
One example is how food inflation is undershooting expectations.
The Bank said: “The indirect impact of higher energy prices through firms’ supply chains onto CPI inflation was judged to have been small to date, and less than expected at the start of the conflict. This was particularly evident in weaker-than-expected food price inflation.
“For example, the Bank’s Agents had reported that annual food inflation was now expected to be around 4% at the end of 2026, compared with previous expectations of 6-7% in April.”
This being said, the Bank is cautious, saying risks to food inflation are skewed to the upside due to high energy inflation, the impact of drought in Europe, and the potential impact of the El Niño weather event.
“Overall, it was possible that indirect effects from energy on CPI inflation had just been delayed rather than diminished. Those effects were expected to increase over the coming months, but the degree and timing would depend on the extent to which firms could pass through energy costs in the current demand environment.”
UK economy expected to grow by 0.4% in Q3 2026
The Bank of England has upgraded its economic growth forecast for the UK.
It now expects UK GDP to grow by 0.4% in the third quarter of 2026, higher than the 0.1% that was projected in July.
This being said, they add that business surveys have continued to point to “somewhat weaker growth”.
Iran war is ‘dominant source of uncertainty’ for inflation outlook
The economic disruption from the Iran war has continued to be the major cause of the current inflationary shock, the Bank of England has said.
The MPC agreed that conflict in the Middle East and its impact on energy prices “remained the dominant source of uncertainty for the inflation outlook”.
The committee meeting’s minutes said: “As was outlined in the July Monetary Policy Report and Minutes, the path for UK inflation was being shaped by the size and duration of the energy price shock, and whether energy prices would affect wage and price-setting behaviour and feed through into broad-based inflationary pressures.”
The minutes also explained the committee’s reasoning for not hiking rates: “Monetary policy could not influence global energy prices, but was being set to ensure that the economic adjustment to them occurred in a way that achieved the 2% inflation target sustainably.
“This involved setting policy to balance the costs of leaning too little against potential inflationary pressures and the costs to economic activity by leaning too much.”
Today’s decision is sixth consecutive hold
Today’s interest rates decision means the MPC has voted to hold rates at 3.75% for their sixth consecutive meeting.
The last time interest rates were changed was 18 December 2025.
Deutsche Bank: Stage set for rate hikes in the coming months
Deutsche Bank has said today’s interest rates decision has “signalled a change in direction by the MPC” as the committee have struck a more hawkish tone on their policy outlook.
Sanjay Raja, chief UK economist at Deutsche Bank, said: “Looking ahead, with CPI on course to push above 4% around the turn of the year, the case for modest rate hikes has increased.
“While rates may be restrictive, policy may not be restrictive enough. The stage for rate hikes is set. The case to go further will depend on whether the unfolding inflation shock translates into rising second-round effects, as per inflation expectations and 2027 wage settlements.”
"This is not an economy crying out for higher rates"
Although forecasters now think the likelihood of a rate hike is higher following today’s MPC meeting, asset and wealth manager Schroders has said this would be the wrong move.
David Rees, head of global economics at Schroders said: "The Bank was right to hold rates today. The markets may be building a case for an autumn hike, particularly if other central banks are tightening, but monetary policy should be guided by the fundamentals of the UK economy rather than global optics.”
It comes after the Federal Reserve, the central bank of the United States, hiked interest rates by 0.25 percentage points at their latest meeting last night for the first time in three years.
The European Central Bank also hiked rates by 0.25 percentage points last week.
However, Rees said the situation in the UK is different: “Domestically generated inflation is contained, wage growth is decelerating and unemployment near 5% points to meaningful slack in the labour market. This is not an economy crying out for higher rates.
"The bigger risk lies with fiscal policy. October’s Budget will be crucial. A spending splurge could revive domestic price pressures and bring forward rate hikes, but the strain already visible in gilt markets should make an inflationary fiscal expansion less likely. For now, the Bank has room to look through a temporary energy-led rise in headline inflation."
What would a future rate hike mean for savers and borrowers?
Although rates were held today, markets are expecting the MPC to vote to raise interest rates in the coming months.
Harriet Guevara, chief savings officer at Nottingham Building Society, said a rate hike would be good for savers as their cash will grow faster, but bad for borrowers who may see their monthly payments rise.
She said: “While future rises might present a glimmer of an opportunity for savers searching for higher interest rates, it would spell more pain for borrowers.
"With so many volatile and unpredictable factors impacting rate decisions, it's almost impossible to time things just right, so I would urge households to focus on what's best for them now, in the medium term and in the longer term.”
Guevara added that savers should regularly check their savings accounts to make sure they are earning a competitive level of interest.
“For mortgage borrowers, while it is a testing environment, whether a first-time buyer or coming to the end of a fixed rate deal, seek professional advice from a qualified broker as soon as possible.
“For those remortgaging, looking at your options early can give you more choice if rates move higher and help you avoid a last-minute scramble when your current deal ends.”
What does the base rate mean for annuities?
Annuities are a form of retirement income. They are effectively a contract you buy with some or all of your pension savings that guarantees a set level of income for a set period of time.
Annuity rates are the amount of money you will get each year as a percentage of your total pension pot. For example, if you get a rate of 5% for your annuity, each year you will receive back 5% of your savings. So, someone with a £100,000 pot would get an annual income of £5,000 a year.
Where annuity rates are and where they go next are influenced by rates on government bonds (gilts), which are in turn influenced by the Bank of England’s base rate.
Jason Hollands, managing director of investment platform Bestinvest, said: “Annuity rates are generally on the up after several weeks of heightened gilt yields and the incomes on offer could be the best they have been for more than 10 years – although they vary considerably according to individual circumstances.
“After years of significant stock market gains, some defined contribution pension holders might take these elevated incomes as an opportunity to lock some of those portfolio gains into a guaranteed income stream for life. Pension holders can use just a portion of their pot to buy an annuity and keep the rest invested in drawdown, potentially getting the best of both worlds.”
Thank you for following out live coverage of today’s interest rates decision.
We will end our live report now, but join us on 21 October for a live report on the latest inflation data, and 5 November for the next interest rates meeting.
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