Key Takeaways
- The Bank of England has kept interest rates unchanged for the sixth straight meeting.
- Derivatives markets imply UK interest rates will rise later this year, though some economists believe the BoE will hold them steady.
- This is the last monetary policy meeting before the Autumn Budget, where tax increases are expected.
The Bank of England has held interest rates at 3.75%, despite calls for a rate hike among some Monetary Policy Committee members.
In a repeat of July’s voting split, six MPC members voted to keep rates steady. No further members joined BoE chief economist Huw Pill, and external members Megan Greene and Catherine Mann, in voting for a hike to combat inflation.
August’s inflation data saw the Consumer Prices Index rise to 3.1%, while the impact of the Iran war and extreme weather on oil and food prices are expected to send inflation higher in the coming months.
Scott Gardner, investment strategist at J.P. Morgan Personal Investing, says the BoE is “biding its time” until clear signs of a surge in inflation emerge.
“Despite headline inflation creeping up over the summer, the labor market continues to soften while closely-watched core and services inflation have both been relatively resilient since the Middle East conflict started,” he says.
When Are the Next Bank of England Interest Rate Decisions?
- Nov. 5, 2026
- Dec. 17, 2026
- Feb. 4, 2027
- March 18, 2027
- Apr. 29, 2027
- June 17, 2027
- July 29, 2027
Will the Bank of England Raise Interest Rates in 2026?
Despite the decision to hold, rate-setters say they stand ready to raise rates if greater inflationary pressures emerge.
Following the meeting, the MPC said any future rate rises will depend on the scale and duration of the energy supply shock caused by the war in Iran.
“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,” says BoE governor Andrew Bailey.
Second-round effects occur when companies pass on higher costs to consumers, who then demand higher wages.
With September’s meeting the last before the Autumn Budget, the Bank of England opted for a “wait-and-see” approach before reacting to any policy announcements on Oct. 28.
Michael Browne, global investment strategist at Franklin Templeton Institute, says the upcoming Budget will be “critical” in shaping the MPC’s thinking ahead of the November meeting.
“The concern, however, is that inflation, driven in part by higher food and energy costs, may continue to rise, while the selloff in the bond market has yet to run its course. Sterling may also have weakened, particularly if other central banks have already moved,” he says.
Activity on derivatives markets now implies the BoE will hike interest rates to 4% in November. Some four interest rate hikes are signaled by these markets in total by July 2027, following two rate cuts in 2024 and four in 2025.
Morningstar chief equity analyst Michael Field says equity markets welcomed the decision to hold. However, with inflation above 3%, he says hikes cannot be ruled out.
“Equity markets are trading close to record highs despite these headwinds and the economy has been surprisingly resilient in the face of ongoing geopolitical uncertainty. But if inflation continues to rise, then something will have to give.”
