Bank of England holds Bank Rate at 3.75% as energy prices lift inflation
The Bank of England kept Bank Rate at 3.75% as inflation reached 3.1%, warning that higher energy prices could push inflation up further and risk longer-term effects.
What you need to know
The Bank of England's Monetary Policy Committee held Bank Rate at 3.75%. Inflation reached 3.1%, and the Bank expects it to rise further as higher energy costs, linked to Middle East conflict, feed through to bills and motor fuel. It said evidence of significant knock-on effects on prices and wages remains limited so far.
- Bank Rate was maintained at 3.75% by the Monetary Policy Committee.
- Inflation stands at 3.1% and is expected to rise further due to higher energy prices.
- The Bank said the longer high energy costs persist, the greater the risk of more persistent inflation.
Decision and inflation outlook
The Monetary Policy Committee maintained Bank Rate at 3.75%, according to a statement published on 17 September 2026. The Bank said inflation had risen to 3.1% and that it expects further increases as higher energy prices have knock-on effects, such as businesses raising prices to cover costs.
The Bank linked the energy pressure to conflict in the Middle East, which it said has disrupted the transportation and supply of energy, raising prices and pushing up household motor fuel costs and utility bills. It said it is difficult to predict what will happen next.
Limited spillovers so far
The Bank said there is little evidence so far of significant knock-on effects on prices and wages. But it warned that the risk of such effects, and of a longer-term impact on the economy, increases the longer energy costs stay high.
It also noted that mortgage rates for households and borrowing costs for firms are higher than before the conflict, making people more cautious about spending. More people are looking for work than there are jobs available, which the Bank said may reduce employers' pressure to raise salaries and appears to be containing the effects of energy price rises.
Policy stance
Governor Andrew Bailey said higher global energy costs have had a limited effect so far on price and wage setting in the UK. He said that if volatility persists, the impact on inflation would be bigger and it would be more likely the Bank would need to raise Bank Rate to return inflation to its 2% target. The Bank said it is monitoring the situation closely.
What did the Bank of England decide about interest rates?
It held Bank Rate at 3.75%. Inflation is 3.1% and the Bank expects it to rise further due to higher energy prices, while warning that prolonged energy volatility could require a rate increase.
Sources & context
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