UK Interest Rate Held at 3.75% again
We give our thoughts on today’s decision to hold UK interest rates exclusively to our website.
18 June 2026
At 12:00 today, as expected, the Bank of England held the UK Base Rate at 3.75%, a rate which has been constant for all of 2026. Seven on the nine members of the Monetary Policy Committee voted for the hold, with two voting for a rise to 4%. The expectation was that only one would vote for the hike.
So in that sense, the vote was ‘hawkish’ and the stock markets briefly dipped slightly, but recovered within the hour. The pound and government bonds also briefly wobbled but well within the morning’s range. So there was no market effect really.
There is further information on this at https://www.bbc.co.uk/news/live/cgevyedpe73t whose chart we have used.
Governor Andrew Bailey said that the oil price contribution to inflation due to the Iran War had not been as bad as expected. However he said “Whatever happens in the future, the higher energy prices of the past four months mean there’s already some inflationary pressure in the pipeline. The Bank’s job is to make sure that doesn’t turn into sustained inflation above our 2% target.” The Bank now think inflation may peak at 3.25% at the end of the year, less than previously estimated in the early days of the war.
This decision was of course made before President Trump’s latest peace announcement today.
Our View
The inflation effect of the Iran War turns out not to be as bad as expected, and although stock markets have slowed a bit, as they often do in summer, they are still up for the year. It’s hard to be sure, but if the Iran War is really over, and oil prices therefore stay low, it is more likely than not that we’ll see rates staying at 3.75% for the rest of the year. Of course there is always the possibility of another event! The next rate decision is on 30 July 2026.
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