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July 30, 2026BANK OF ENGLAND MONETARY POLICY The Monetary Policy Committee (MPC) of the Bank of England voted to maintain the Bank Rate at 3.75% at its July meeting.
The conflict in the Middle East remains the dominant source of uncertainty for the inflation outlook. Crude oil and natural gas prices have remained volatile and higher than pre-conflict levels. While monetary policy cannot influence global energy prices, the MPC stated that policy will be set to ensure that the economic adjustment to higher energy costs occurs in a way that achieves the 2% inflation target sustainably. The measures required to achieve this will depend on the scale and duration of the shock and how it propagates through the economy, including through financial conditions.
CPI inflation fell to 2.6% in June, down from 2.8% in May, reflecting continued moderation in services and food inflation. However, inflation is expected to rise to around 3.2% by late 2026 as higher energy prices continue to pass through to households and businesses. Wage growth is expected to be stable over the forecast period. Risks to inflation remain elevated if energy prices stay high for for a prolonged period.
UK GDP growth has slowed following strong growth earlier in the year. GDP is estimated to have grown 0.3% in Q2, while underlying GDP growth was estimated at 0.1%, reflecting subdued consumer spending, weaker business confidence, and tighter financial conditions. The Commitee projects subdued GDP in the second half of 2026 and first half of 2027. Growth is expected to pick up to 1.1% in Q3 of 2027 supported by consumption.
The labour market continues to loosen. The unemployment rate was 4.9% in the three months to May and is projected to rise gradually to 5.1% in Q4 of 2026. Underlying employment growth has remained broadly flat, vacancies remain below pre-pandemic levels, and wage growth has continued to slow, with private-sector regular pay growth easing to 2.9%. Overall, the Bank judges that there is a degree of spare capacity in the labour market that should help contain inflation pressures.
The Committee judged that maintaining Bank Rate at 3.75% provides sufficient restraint for now while allowing time to assess incoming evidence. It emphasized that it stands ready to act as necessary to ensure inflation returns sustainably to the 2% target.
The next scheduled monetary policy meeting will be on September 17, 2026.
Sources:
Bank of England, Monetary Policy Summary and Minutes
Bank of England, Monetary Policy Report - July 2026
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