Bank of England holds rates at 3.75% amid inflation warning

The Bank of England held its key interest rate at 3.75% on Thursday, September 17, 2026, despite rising inflation and a warning that prolonged conflict in the Middle East could force future rate increases. The Monetary Policy Committee voted 6-3 to keep the rate unchanged, with three members advocating for an immediate quarter-point rise to 4%. The decision comes as UK inflation climbed to a five-month high of 3.1% in August, driven largely by a sharp increase in petrol and diesel prices. The Bank of England revised its inflation forecast upward, projecting the Consumer Price Index to reach about 4% in early 2027, up from a previous forecast of 3.2% for late 2026. Governor Andrew Bailey stated that higher global energy costs have so far had a limited effect on UK price and wage setting, but cautioned that continued volatility could necessitate tighter policy. "The longer this volatility persists, the bigger the impact it will have on inflation, and the more likely it is we will need to raise Bank Rate to ensure that inflation falls back to our 2% target," Bailey said in a prepared statement.