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Jun 18, 20261
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Bank of England Holds Interest Rate at 3.75% as Inflation Pressures Ease
The Bank of England held its main interest rate at 3.75% on Thursday as inflation pressures eased to 2.8% in May and energy prices moderated. While two committee members voted for a rate increase due to ongoing inflationary pipeline concerns, the decision reflected broader market expectations and the impact of reduced geopolitical tensions on commodity prices.
Quick Facts
Who
Bank of England
What
Held main interest rate at 3.75%
When
Thursday, June 2026
Where
United Kingdom
- Held main interest rate at 3.75%
- Maintained unchanged rate decision
- Two committee members voted for quarter-point increase
- Seven committee members voted against rate increase
- Bank of England
The Bank of England maintained its main interest rate at 3.75% on Thursday, as inflationary pressures on the British economy have moderated following de-escalation in Middle East tensions. The decision came after May inflation figures showed prices holding steady at 2.8%, above the Bank's 2% target but lower than previously anticipated.
The rate decision was widely expected by economists and market observers. While inflation remains elevated, the recent decline in oil and gas prices—which had spiked following geopolitical tensions earlier in the year—has provided some relief. Andrew Bailey, Governor of the Bank of England, characterised the recent fall in oil prices as "encouraging," though he cautioned that energy costs remain higher than pre-conflict levels.
Bailey acknowledged that months of elevated energy prices have already created inflationary momentum in the pipeline. "The Bank's job is to make sure that doesn't turn into sustained inflation above our 2% target," he stated. The Monetary Policy Committee voted unanimously not to raise rates at Thursday's meeting, though two of the nine members expressed ongoing concerns about pipeline pressures and voted in favour of a quarter-point increase.
Economists expect the Bank to maintain its current rate in coming months, provided that recent declines in energy prices persist. Rate-setters remain vigilant about the potential for energy price volatility to reignite inflationary pressures, making future decisions dependent on the trajectory of global commodity markets.
Why This Matters
The Bank of England's decision to hold rates signals confidence that inflation is moderating without requiring further tightening. This is significant for UK households and businesses facing elevated borrowing costs—it suggests relief may come if energy prices remain stable. However, the fact that two committee members still voted for a rate hike highlights lingering concerns about persistent inflationary pressures in the pipeline, indicating that future rate cuts remain uncertain and depend heavily on global energy markets.
Timeline & Sources
Feb 28, 2026
WireStart of Iran geopolitical tensions that spiked oil and gas prices
Jun 18, 2026
WireBank of England Monetary Policy Committee decision to hold interest rate at 3.75%