UK Interest Rate Held at 3.75% for the sixth time
We give our thoughts on today’s decision to hold UK interest rates exclusively to our website.
17 Sep 2026
At 12:00 today, as expected, the Bank of England held the UK Base Rate at 3.75% for the sixth time, a rate which has been constant for all of 2026. Six of the nine members of the Monetary Policy Committee voted for the hold, with three voting for a rise to 4%. This is exactly the same composition as the last decision on 30 July.
As there had been some speculation that there would be a rise, the markets saw the release as slightly ‘dovish’, ie less bad than it might have been. Sterling and bond yields (inverse to prices) dropped on the release. The UK FTSE100 and FTSE250 indices also rose for the same reason. These were only small moves, as most of this was already priced in.
Also affecting the markets was the Bank’s surprise decision to pause their quantitive tightening programme (selling off government bonds), hence the move up in bond prices.
Bank of England Governor Andrew Bailey warned that the longer global energy prices remain volatile, the higher likelihood of a rate rise. He said “So far, higher global energy costs have had a limited effect on price and wage setting in the UK. … But 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.”
There is more information on the BBC Website whose chart we have used.
Our View
Last month’s UK annual inflation was 3.1%, rising from 2.9% the month before. Notably the ‘core’ inflation rate (without food and energy) is much lower at 2.6%. This was anticipated by the Bank at the July meeting and has come to pass. As we said last time, nobody knows what will happen next in the Iran War. Some commentators are saying that the November 3rd US mid-term elections may influence President Trump to end it.
We always welcome lower rates, and given the issues, we were fortunate to get a rate hold this time. So we think this is positive, and like everyone can only hope that resolution of the Iran War and thus energy price stability happens as soon as possible.The next inflation report is on 21 October and the next rate decision is on 5 November.
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