Bank of England holds rates at 3.75% as wage pressure and lower oil prices shape outlook

Rate decision

The Bank of England kept Bank Rate unchanged at 3.75% on June 18, holding borrowing costs steady for UK households and businesses after a split vote on the Monetary Policy Committee.

The committee voted 7-2 to leave rates where they were. Two members, Huw Pill and Megan Greene, voted for a rise to 4%, underscoring that officials remain divided over how much inflation risk is still left in the economy.

The decision came as policymakers weighed easing global energy prices against stubborn domestic wage pressure and a labor market that is softening only gradually.

Why policymakers held

The Bank’s latest move followed UK inflation data showing consumer prices held at 2.8% in May, a reading that was below the sharper increase officials had previously feared.

That softer inflation backdrop gave the majority of the committee room to pause and assess whether earlier tightening was still working through the economy.

At the same time, the Bank said wage growth and underlying price pressure have not disappeared. Earlier labor-market data cited in live coverage showed unemployment at 4.9% and basic pay growth at 3.4% year on year in the three months to April.

Energy risk and the forecast

The Bank also lowered its inflation forecast and said it now expects inflation to rise to a little over 3.25% in the fourth quarter.

It said global energy prices have fallen since the previous meeting because of developments in the Middle East, but remain above pre-conflict levels and are still volatile.

Governor Andrew Bailey said there is still some inflationary pressure in the pipeline and that the Bank would respond promptly if higher energy costs feed through into shop prices or wages.

Market reaction and outlook

Live market coverage reported that the pound fell to a 10-week low against the dollar after the decision, reflecting expectations that the Bank is keeping policy on hold for now while remaining alert to future shocks.

The meeting leaves the policy debate centered on two conflicting forces: lower oil and gas prices that argue for patience, and wage growth that remains firm enough to keep the risk of renewed inflation alive.

For now, the hold gives the Bank more time to see whether softer inflation and weaker labor data continue to build, or whether new energy shocks reverse that progress.

What to watch next

Investors and policymakers will now look for the full minutes and any further comments from MPC members for clues on how broad the support was for keeping rates unchanged.

The next set of UK inflation and labor-market releases will be important in testing whether the Bank’s updated forecast path holds up, and whether markets keep pricing a late-2026 hike or start leaning toward cuts later.