Bank of England Holds Rate at 3.75% as Fuel Pushes Inflation Up

The Bank of England kept Bank Rate at 3.75% on 17 September 2026. The Guardian

The decision was published on 17 September, the date the Bank had listed as due for its next Bank Rate decision. Bank of England Bank Rate is the Bank's central interest rate, and it guides borrowing costs for households and firms.

The vote was 6-3 to maintain. Three members voted to raise Bank Rate by 0.25 percentage points to 4% at the meeting ending on 16 September 2026. Bank of England

UK inflation rose to 3.1% in August 2026, up from 2.9% in July 2026. The Bank's inflation target is 2%. Escalating hostilities in the Middle East drove up the average price of petrol and diesel by almost a quarter. The Bank has said energy prices were high and volatile due to conflict in the Middle East while Bank Rate was held at 3.75%.

Rates have been on hold since at least June. At its meeting ending on 17 June 2026, the Committee voted by 7-2 to maintain Bank Rate at 3.75%. At its meeting ending on 29 July 2026, it voted by 6-3 to maintain Bank Rate at 3.75%. Support for a rise moved from two to three and then stayed at three through September.

Earlier in the year, conflict in Iran stopped a cut that had been expected. BBC

Outside the UK, the US Federal Reserve raised interest rates for the first time since 2023. The European Central Bank decided to raise eurozone borrowing costs in the week before 17 September 2026. The Bank of England held while the Fed and the ECB moved higher.

Views on what comes next differ. In an August 2026 Reuters poll, a strong majority of economists expected the Bank to leave interest rates unchanged at 3.75% for the rest of the year. Reuters City traders now predict a quarter-point rise in UK borrowing costs from as early as November 2026 and three further increases to 4.75% next year. Andy Burnham said he was prepared to take "difficult decisions" to tackle high inflation and would take action on the cost of living at next month's budget.

The broader context here is imported price pressure combined with higher rates elsewhere. Fuel has a direct weight in headline inflation and in business costs. It passes quickly into transport, logistics and food distribution. Think of interest rates like a brake on spending: this kind of fuel shock is hard to ignore when inflation is already more than a point above target and public expectations could shift.

In my view, the split vote matters as much as the hold. A 6-3 vote in July and September, after 7-2 in June, keeps the chance of a rise open without committing the majority. Markets have priced that shift, moving from an extended hold to four rises by next year. That repricing tightens conditions early, through swap rates, mortgage pricing and company borrowing. It also leaves less room for the budget. Support for household incomes could ease fuel pain now but sustain demand and slow the fall in inflation. Less support could help lower inflation but sharpen the squeeze from fuel and borrowing costs. Coordination, sequencing and communication will shape how fiscal and monetary policy work together into winter.