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2026-09-17 19:03:09
[Bank of England Holds Rates Steady, Inflation Risks Tied to the Upside] ⑴ The Bank of England's Monetary Policy Committee voted 6-3 to keep the interest rate unchanged at 3.75%, with three members voting to raise it by 25 basis points to 4%. ⑵ The ongoing conflict in the Middle East continues to push up crude oil and refined product prices, making energy prices higher and more volatile than before the conflict. ⑶ UK CPI inflation rose to approximately 3.1% in August and is likely to rise further in the coming quarters. ⑷ The objective of monetary policy is to ensure that inflation sustainably falls back to 2% as the economy adapts to the energy shock. ⑸ The required policy stance depends on the size, duration, and transmission mechanism of the shock in the economy. ⑹ To date, there is little evidence of a substantial secondary effect on price and wage settings. ⑺ However, the longer energy prices remain high or volatile, the greater the risk of such an effect, which policy needs to guard against. ⑻ Economic activity was slightly stronger than expected, but weak labor market conditions and higher interest rates faced by households and businesses since the outbreak of the conflict will weigh on inflation over time. (9) Overall, the Committee judged that the risks to the inflation outlook were tilted to the upside and to a greater extent than assessed in the July Monetary Policy Report, although the outlook could still change significantly as the situation in the Middle East evolves. (10) The Committee considered it appropriate to keep the Bank Rate unchanged at this meeting and stood ready to act as necessary to ensure that CPI inflation remained on track toward the 2% target over the medium term. (11) At this meeting, the Committee also unanimously voted to reduce the stock of UK government bonds, financed by the central bank's reserves, used for monetary policy purposes, to zero. (12) This will be implemented through a multi-year plan, reducing the remaining stock at an average rate of approximately £46 billion per year, to be completed by the end of 2034, including approximately £20 billion in sales per year and the natural reduction of maturing government bonds.
