UK Interest Rate Held at 3.75% yet again
We give our thoughts on today’s decision to hold UK interest rates exclusively to our website.
30 Jul 2026
At 12:00 today, as expected, the Bank of England held the UK Base Rate at 3.75% for the fifth 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%. The expectation was that only two would vote for the hike. Last month was similar, the vote was 7-2 when 8-1 was expected.
Like last month, the vote was therefore considered ‘hawkish’. However, unlike last month, the FTSE 100 had already dropped 0.7% in advance of the release, and actually recovered by 0.5% after 12:00. Similarly bond yields fell slightly. Sterling hardly moved at all, having made a move up against the dollar last night when the US Federal Reserve also held rates at 3.75%. So in other words markets had priced in the event.
Bank of England Governor Andrew Bailey said: “Inflation has fallen faster than expected but the conflict in the Middle East continues to mean high and volatile energy prices … our job is to make sure any increase in inflation is temporary and that it comes back to our 2% target.”
In his press conference, the Governor stressed the uncertainty and volatility of the on-off Iran war making it hard to forecast energy costs and thus inflation. He did however say that food inflation is likely to fall.
There is more information on the BBC Website whose chart we have used.
Our View
Last month’s UK annual inflation was 2.6%, lower than expected. The Bank do expect that to rise again, but the problem is exemplified by the seesaw spot price of oil, as nobody knows what will happen next in the Iran War. This is the principal determinant of inflation, as it would seem that items other than energy are stable.
We always welcome lower rates, but we can see the Bank’s dilemma and agree with their strategy of holding the rate at a reasonable 3.75%, the same as the US. So no news is good news, for now.
The next inflation reports are on 19 August and 16 September, and the next rate decision is on 17 September.
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