The Bank of England has kept interest rates unchanged at 3.75 per cent as policymakers weigh persistent inflationary pressures and the prospect of higher energy costs.
The Monetary Policy Committee voted to leave the Bank rate at 3.75 per cent, where it has remained since December 2025.
The decision leaves borrowing costs unchanged for households and businesses, while continuing to influence mortgage rates, savings returns and the wider pace of price growth.
The Bank has been attempting to bring inflation back towards its 2 per cent target after raising rates sharply following the Covid-19 pandemic. Bank rate reached a peak of 5.25 per cent during the tightening cycle.
The latest decision comes amid renewed concerns over inflation, with higher energy prices expected to put pressure on household budgets and business costs.
Overseas developments are also shaping the monetary policy outlook. The US Federal Reserve has raised its benchmark interest rate for the first time in three years, taking its target range to between 3.75 and 4 per cent.
Markets are already pricing in the possibility of roughly four further rate increases over the next 12 months, which would take borrowing costs to about 5 per cent.
The divergent rate expectations underline the uncertainty facing central banks as they attempt to balance inflation control against economic growth.
For UK households, a prolonged period of elevated borrowing costs could continue to weigh on mortgage affordability and consumer spending, while businesses face higher financing costs.
Jason Hollands, Managing Director of investment platform Bestinvest, said: “Today’s decision by the MPC to keep interest rates on hold was widely expected, despite data this week that showed headline inflation nudged up to 3.1 per cent last month and yesterday’s hike by the US Federal Reserve.
“A rate hike today would have been a genuine shock, given subdued core inflation, earnings data that suggests price pressures are not yet feeding into higher wage demands, and the Bank’s relatively dovish messaging.
“However, the odds on a hike at the next meeting on November 5 are shortening rapidly.”
Susannah Streeter, Chief Investment Strategist, Wealth Club said: “Inflation is the fever central bankers want to bring down, but the Bank of England is holding off administering the bitter medicine of an interest rate hike. The UK economy is fragile, and already feeling the chill of sluggish growth and a cooling jobs market, and for now this should offset the risks of steamy energy costs being passed easily through to hotter consumer prices. With shoppers worried about rising borrowing costs and bracing for higher bills to land, they may be less likely to spend if price tags become more expensive.
However, the longer the war with Iran continues to rage and keeps crude and gas prices elevated, the greater the chances of a hike later this year and next, especially if data shows consumer price inflation continues to rise. Already three members around the table wanted to hike rates immediately to 4%, and they may well be joined by more if the chronic energy crunch continues. So, a hike on November 5th still looks like a distinct possibility if the bonfires of inflation intensify.
The US is a more robust patient, with the spending might of AI hyperscalers pulsing through the veins of the economy, supporting strong job creation, which is why the Fed moved to douse down inflation by hiking rates yesterday.
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