Interest rates on hold…for now

The Bank of England (BoE) has voted to keep the central interest rate at 3.75% as had widely been expected.

Six members of its Monetary Policy Committee (MPC) voted to keep rates on hold, with three voting for an increase. This compared to a seven-two vote in the previous MPC meeting.

Markets had anticipated the decision, as the BoE attempts to grapple with rising oil prices caused by the conflict in Iran.

The Base rate affects borrowing costs for consumers and businesses. An unexpected increase would have likely seen mortgage rates increase, as well as the interest banks pay savers.

Explaining the decision, the BoE noted that inflation had fallen by more than expected. However, as a result of the energy price increases, it expects inflation to pick up again later this year.

A BoE statement said: “We are monitoring the situation very closely; whatever happens, we’ll make sure that inflation gets back to the target in the medium term; for the moment, interest rates are at about the right level to do that, so we’ve held them at 3.75%.”

US rates also held steady as expected

The BoE news came a day after the US central bank (the Fed) also voted to leave interest rates unchanged. However, with Fed chair Kevin Warsh no longer giving clues about future decisions, there is less certainty about where rates might go next.

As a result, experts and investors are interpreting the situation differently. Some economists believe interest rates may need to rise sooner rather than later, while financial markets are currently signalling that any increase is more likely later in the year.

Meanwhile, rising oil prices, driven by the ongoing Iran-US conflict, are adding to inflation pressures in both the US and the UK. The longer these persist, the more likely it is that central banks may need to consider higher interest rates to help bring inflation back under control.

SJP Approved 30/07/2026