The Bank of England’s Monetary Policy Committee (MPC) voted 6-3 to leave Bank Rate unchanged at 3.75%, maintaining its cautious approach as it balances moderating domestic inflation against renewed risks from higher global energy prices. Three MPC members – Huw Pill, Catherine Mann and Megan Greene – voted for a 0.25 percentage point increase, reflecting concerns that inflationary pressures could prove more persistent.
The Bank’s central forecast expects UK economic growth to remain modest over the next year, with GDP increasing by around +1.1% through 2027 before strengthening during 2028. Inflation is projected to rise temporarily, peaking at around +3.2% later this year as higher energy prices feed through to households and businesses, before easing back towards the Bank’s +2% target over the medium term.
The MPC noted that while underlying domestic inflationary pressures have eased and the labour market has continued to soften, the outlook has become more uncertain following recent geopolitical developments and their impact on energy markets. The Bank therefore reiterated that monetary policy is not on a pre-set path and that it stands ready to respond if inflationary pressures become more persistent, with Bank of England governor Andrew Bailey stating that “If we get a continuation of this conflict going on and oil prices stay above $100 a barrel, the odds are that interest rates will have to go up higher… so it depends on how the events in the Middle East, frankly, unfold. And sadly, we all know this is highly unpredictable”.
For manufacturers, the latest projections point to a period of continued but subdued economic growth, with borrowing costs expected to remain relatively high while the Bank monitors the balance between slowing domestic demand and external inflationary risks.
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/july-2026 or request this from MTA.