The Bank of England’s Monetary Policy Committee (MPC) voted 8-1 to keep the Bank Rate unchanged at 3.75%. The Bank’s Chief Economist, Huw Pill, was the sole member to vote for an increase to 4%. While some other members considered supporting a rise, the majority opted to wait for clearer evidence on the extent of inflationary pressures.
However, in its announcement, the Bank pointed to the possibility of “forceful” rises to come. Governor Andrew Bailey stressed how difficult it is to predict which way things will go, due the volatility caused by the Iran war and its impact on energy prices, stating that “You look at the oil price curve, it went up, then you had a period where it was coming back down again, and now it’s gone back up again. All of that hangs off, frankly, what’s going on in the Gulf and… even more so actually sometimes what’s being said about what’s going on in the Gulf.”
The MPC outlined three scenarios for the UK economy following the war in Iran: in Scenario A, energy prices ease and inflation peaks at 3.6% this year before falling below 3% by autumn next year; in Scenario B, energy prices decline more slowly, with inflation reaching 3.7% and remaining elevated for longer; and in the most adverse Scenario C, oil stays above $120 a barrel, pushing inflation to a peak of 6.2% early next year and potentially requiring interest rates to rise to 5.5%. While oil prices remain volatile and currently elevated, the Bank assigned no probabilities to these scenarios, though the Governor indicated greater weight on Scenario B.
In an adverse scenario where oil prices remain above $120 a barrel and gas prices rise sharply, the Bank suggests that interest rates may need to increase materially – potentially to above 5% – to contain inflation, which could peak at around 6%, with the trade-off of weaker growth and higher unemployment.
The Bank of England’s Agents’ Summary of Business Conditions (ASBC) notes that manufacturing output continues to decline modestly year-on-year, driven by weak demand in construction and consumer-facing sectors. Growth in aerospace, defence, green technology and data centres provides some offset, although confidence has deteriorated amid geopolitical tensions and concerns over rising input costs.
For more details, you can get the Monetary Policy Summary and minutes of the MPC meeting from the Bank’s website at https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2026/april-2026 or request this from MTA.