The Bank of England left interest rates unchanged on Thursday for the sixth meeting running, but told borrowers not to get comfortable. High energy prices, it said, make a future rise more likely, not less.
The Monetary Policy Committee voted 6-3 to hold Bank Rate at 3.75%, with three members, including chief economist Huw Pill, pushing for a quarter-point hike to 4%. It was the first time since the start of the year that a minority openly voted for an increase, and markets took note.
The backdrop is the oil shock that followed the US-Israel war with Iran, which has pushed up petrol and diesel prices worldwide and fed through to faster inflation at home. Consumer price growth ran at 3.1% in August, well above the 2% target, and on Thursday the Bank raised its forecast for inflation to “slightly above 4%” at the start of next year. Governor Andrew Bailey said officials are still working out how much of the energy shock will spill into wages and other prices.
According to the BBC, Bailey said the direct impact of higher fuel costs was clear, but that the fuller picture would take time to emerge. He added that rate cuts would only come back into view with an end to the conflict in the Middle East and energy prices returning to where they were before it began.
There was one piece of genuinely good news for the gilt market. The Bank also announced it would slow the pace of sales of the UK government bonds it still holds, and long-term borrowing costs eased on the announcement.
The MPC was not uniformly hawkish on everything. The committee judged the UK economy “more resilient” than it had feared, lifting its growth prediction for July to September from 0.1% to 0.4%. And because the pass-through of energy costs has so far been limited, food price inflation is now expected to reach around 4% by the end of the year, better than the 6-7% the Bank had previously pencilled in.
Borrowers may not feel much comfort from any of that. With a higher Bank rate now priced in by markets for next year, lenders have been quietly repricing. Financial information service Moneyfacts says the average two-year fixed residential mortgage sits at 5.77%, its highest since May, while five-year deals average 5.83%, a level last seen in November 2023.
The US Federal Reserve raised rates for the first time in three years on Wednesday, and the European Central Bank has hiked twice since June, which puts the Bank’s hold under some pressure. For households coming off fixed deals, the message from Thursday is that the easing cycle has stalled, and possibly reversed. The next MPC decision lands alongside the autumn Budget, six weeks away, and on the evidence of this meeting nobody should assume a hold.
Details of the decision are published in the Bank of England’s September 2026 Monetary Policy Summary, and this article draws on the BBC News report of 17 September 2026.