Key Takeaways
- The Bank of England kept Bank Rate at 3.75% in September.
- UK CPI inflation reached 3.1% in August, while the Bank expects inflation to rise further later in 2026.
- Policymakers said persistent energy price pressures could increase the risk of inflation becoming more entrenched.
Bank Rate Remains at 3.75%
The Bank of England's Monetary Policy Committee voted to maintain Bank Rate at 3.75% in September.
Six members voted to keep the rate unchanged, while three members supported a 0.25 percentage-point increase to 4%.
The decision came as policymakers assessed the impact of higher energy prices and other inflationary pressures on the UK economy.
UK Inflation Was 3.1% in August
UK consumer price inflation stood at 3.1% in August.
The Bank expects inflation to increase further, reaching around 3.75% in the fourth quarter of 2026 and slightly above 4% in the first quarter of 2027, based on energy prices as of 14 September.
The outlook reflects the potential impact of higher energy costs on household and business prices.
Energy Prices Remain a Key Inflation Risk
Bank of England policymakers said a larger or longer-lasting energy price shock could create wider inflationary effects.
The Bank said there had been little evidence so far of material second-round effects in price and wage-setting. However, it said the risk of such effects was greater the longer higher energy prices persisted or remained volatile.
Second-round effects can occur when an initial increase in energy costs spreads through other prices, wages and business costs.
Policy Outlook Could Shift
The Committee said the policy stance needed to return inflation sustainably to the 2% target would depend on the scale and duration of the energy shock and how it spread through the economy.
It said the risks to the inflation outlook were tilted to the upside, more so than at the time of the July Monetary Policy Report.
However, this does not mean that a future rate increase has already been decided.
The Bank's assessment will depend on how inflation risks develop and whether higher energy costs become more persistent across the economy.
What the September Vote Shows
The September vote demonstrated that the MPC was not unanimous on keeping interest rates unchanged.
Three members preferred a 0.25 percentage-point increase, while six supported maintaining the existing 3.75% rate.
The split provides an indication of differing views among policymakers about the appropriate response to the inflation outlook.
What Happens Next
The Bank of England will continue monitoring inflation, energy prices, wages and other economic developments before its next monetary policy decision.
The next scheduled Bank Rate announcement is due on 5 November 2026.
Until then, policymakers will assess whether current inflation pressures are becoming more persistent and whether additional monetary policy action may be required.
Inflation Remains Central to the Rate Debate
The Bank's latest assessment shows how energy prices remain an important factor in the UK's inflation outlook.
While Bank Rate remains at 3.75%, policymakers are considering how persistent inflation could affect future decisions.
The September decision therefore leaves the Bank with its existing rate while keeping attention focused on inflation developments and the potential effects of continued energy price volatility.