The Bank of England’s Monetary Policy Committee (MPC) voted unanimously on 19 March to hold the Bank Rate at 3.75%, marking the first unanimous decision since September 2021. Notably, members who had previously supported rate cuts – Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor – shifted to a hold position in response to heightened geopolitical risks.
The more hawkish MPC members remain focused on the risk that inflation is still too high in the near term, rather than on the possibility of it falling below target over the medium term, which has been a greater concern for more dovish voices on the committee. The recent rise in oil and gas prices has strengthened this near-term inflation concern and reduced the case for immediate rate cuts.
The MPC decision reflects renewed concern that inflationary pressures may persist in the near term, particularly as rising oil and gas prices add to existing cost pressures. While inflation had been expected to fall steadily, the evolving situation in the Middle East has increased the risk of a renewed pickup. The Bank estimates inflation could rise to between 3.5% and 4% in coming months.
The Bank’s Governor Alan Bailey stated that “War in the Middle East has pushed up energy prices. You can already see that at the petrol pump and, if it lasts, it will feed into higher household energy bills later in the year. Monetary policy cannot reverse this shock to supply. Its resolution depends on action taken at its source to restore the safe passage of shipping through the Strait of Hormuz.”
While acknowledging that monetary policy cannot directly influence global energy prices, the MPC aims to respond in a way that ensures inflation returns sustainably to its 2% target. In the near term, financial markets have already reacted, with increases in long-term government borrowing costs and fixed-rate mortgage pricing.
The next policy decision, due at the end of April, will provide further clarity as the geopolitical situation develops. In the meantime, other major central banks – including the Federal Reserve, European Central Bank, Bank of Japan and Bank of Canada – have also held rates steady, reflecting a broadly cautious global stance amid elevated uncertainty.
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/march-2026 or request this from MTA.