Bank of England Holds at 3.75% as Three Officials Vote to Hike

The Bank of England held Bank Rate at 3.75% on Thursday, but the vote revealed a significantly hawkish minority. Six members backed no change while Megan Greene, Catherine Mann and Huw Pill voted for an immediate 25-basis-point increase to 4%. The split matters because it shows that the threshold for renewed UK tightening is becoming more contested as energy and food prices lift the inflation outlook.

Inflation risks have shifted further upward

The MPC said risks to the inflation outlook were tilted further to the upside. Its short-term projections put CPI somewhat above 4% in early 2027, with higher energy prices and expected food inflation increasing the risk that households, businesses and wage setters respond in ways that make inflation more persistent. The three dissenters argued that waiting for definitive evidence of second-round effects could leave policy behind the curve.

Members who voted to hold emphasized restrictive financial conditions, softer domestic demand and still-limited evidence of second-round effects. Even within that majority, however, the minutes repeatedly acknowledged that a prolonged Middle East conflict and persistent energy shock could require tighter policy. For sterling and short-dated UK rates, the decision therefore preserves a meaningful probability of a future hike rather than reopening an easing cycle.

The MPC unanimously agreed to reduce the remaining monetary-policy gilt portfolio to zero through a multi-year plan. After setting aside £120 billion of long gilts to back banknote issuance, the remaining £368 billion is intended to run down at an average £46 billion a year through annual sales of £20 billion plus maturities, with completion targeted for 2034. Active APF auctions will pause while implementation options involving the government are reviewed.