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The Bank of England decided to keep interest rates unchanged at 3.75%, despite growing inflation pressures and rising energy prices due to the conflict in Iran. Governor Andrew Bailey hinted at a potential rate hike in November if the Middle East situation persists, while emphasizing limited evidence of broader economic inflation impacts. This decision comes as other major central banks have already increased their interest rates, and the Bank of England is pausing its bond sales to ease government borrowing costs.
Written locally by qwen2.5:14b on 2026-09-18,
using this article's own text rather than the other coverage of the
same event (that is the story summary below).
Story summary
The Bank of England’s Monetary Policy Committee (MPC) voted 6-3 to maintain the bank rate at 3.75%, a decision that concealed a shift within the majority towards potential future rate hikes. The committee’s split vote follows rising concerns over inflation, driven by volatile global energy prices due to the ongoing Iran war.
Consumer Prices Index (CPI) inflation rose to 3.1% in August, up from 2.9% in July and reaching a five-month high. This increase is primarily attributed to higher fuel costs. Three committee members—Huw Pill, Megan Greene, and Catherine Mann—voted for raising the rates by 0.25 percentage points.
Despite maintaining current interest rates, policymakers have issued warnings that prolonged volatility in energy prices could necessitate future rate hikes to ensure inflation falls back to its 2% target. This hawkish stance was reflected in post-meeting statements from several MPC members indicating their readiness to support higher rates if conditions worsen.
Economists and financial analysts are now closely monitoring economic indicators, including UK retail sales figures and US industrial production data, for further signals that could prompt the Bank of England to increase borrowing costs. The FTSE 100 index in London saw an upturn following the MPC’s announcement, with investors digesting the potential implications of a future rate hike on market stability and economic conditions.
Written for “Bank Of England Interest Rate Decision” on 2026-09-18,
grounded in this article and the 9 other(s) covering the same event.
Why this leaning score
This article does not take a side on a contested political
question, so it has no leaning score. That is an
answer rather than a gap: a match report or a rescue can be warmly
or critically written without being left or right, and scoring it
anyway is how approval of a subject gets recorded as a political
position.
No political leaning scored for article 17589 · logged 2026-09-18
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The Bank of England yesterday stood its ground as the last major central bank to resist interest rate increases despite growing inflation pressures.
Governor Andrew Bailey signalled a hike could be on the way but fought shy of taking action for now – even after counterparts in the US and Europe did so.
It came as the Bank plans to pause its sales of UK bonds in a move that surprised markets and lowered Government borrowing costs.
uncertain
that → see → costs
Rising oil and gas prices, due to the Iran war, have intensified global price pressures and caused bond market jitters.
asserted
prices → rise → jitters
The European Central Bank has hiked interest rates twice this year to quell inflation anxiety.
asserted
Bank → hike → anxiety
And even in the US, where the Federal Reserve is under intense pressure from President Donald Trump to cut rates, there has been a quarter-point interest rate rise.
Bank of England Governor Andrew Bailey signalled a hike could be on the way but fought shy of taking action for now – even after counterparts in the US and Europe did so
In Threadneedle Street, however, the vote was split at six to three in favour of leaving rates at 3.75 per cent – though the minority backing a hike increased and included chief economist Huw Pill.
uncertain
minority → cut → Pill
That is despite the Bank predicting energy prices are set to surge 24 per cent in January, helping lift inflation past 4 per cent, more than twice its 2 per cent target.
asserted
prices → predict → cent
Pill said an increase would send a ‘clear signal’ of a commitment to hitting the target ‘amid the fog of geopolitical conflict and data noise’.
asserted
increase → say → conflict
But Bailey said there was ‘very limited evidence’ of the energy price shock spreading through the economy causing ‘second-round’ inflation effects.
But he acknowledged that if the Middle East conflict persists, as seems likely, rates would have to go up.
asserted
rates → say → effects
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, said the Bank chose ‘patience over panic’ by balancing inflation risks with ‘little evidence that it is fuelling more persistent, economy-wide price pressures’.
asserted
it → say → pressures
Other experts said the Bank was signalling a probable hike at the next meeting of its rate-setting Monetary Policy Committee in November.
asserted
Bank → say → November
Thomas Pugh, chief economist at accounting firm RSM, said the Bank was likely to be ‘uncomfortable leaving rates on hold when inflation rises above that crucial 4 per cent threshold’.
asserted
inflation → say → threshold
He added: ‘The likelihood of a synchronised global hiking cycle now looks more likely than at any time since Russia’s invasion of Ukraine.’
asserted
likelihood → add → Ukraine
Meanwhile, the Bank has started overhauling the way it unwinds quantitative easing – the programme where it bought £895billion of bonds to boost the economy during the financial crisis in 2009 and the pandemic.
asserted
it → start → 2009
It has been reducing these holdings by selling the bonds.
asserted
It → reduce → bonds
But that has weighed on bond prices, pushing up their yields – a proxy for Government borrowing costs.
asserted
that → weigh → costs
Recently, yields on 30-year UK bonds, known as gilts, reached their highest since 1998.
asserted
yields → know → 1998
By pausing sales of gilts for six months and halting sales of longer-date gilts entirely, the Bank has reduced that pressure – delivering a boost for Chancellor John Healey.
asserted
Bank → pause → Healey
The move sent yields on 30-year gilts falling from 5.86 per cent to 5.74 per cent.
asserted
yields → send → cent
Ten-year gilt yields dropped from 5.3 per cent to 5.22 per cent.
asserted
yields → drop → cent
If you take out a product This is Money may earn a commission.
uncertain
Money → take → commission
These deals are chosen by our editorial team, as we think they are worth highlighting.
asserted
they → choose → team
This does not affect our editorial independence.
asserted
This → affect → independence
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