The Bank of England's Monetary Policy Committee (MPC) is poised to hold the main Bank Rate at 3.75% this week, a decision widely anticipated by economists. This marks a period of stability following the rate cut to 3.75% in December 2025, even as the economic landscape presents a somewhat contradictory picture.
The Numbers Game: Inflation vs. Growth
The latest figures from the Office for National Statistics (ONS) show a welcome dip in inflation. The Consumer Prices Index (CPI) rose by 2.8% in the 12 months to April 2026, a notable decrease from 3.3% in March. This was below market expectations and represents the lowest reading since March 2025, edging closer to the Bank's 2% target. Core inflation, which strips out volatile energy and food prices, also fell to 2.5%.
However, the economic growth narrative is less straightforward. The UK economy contracted by 0.1% in April 2026, the first monthly decline since August 2025. While real gross domestic product (GDP) did grow by 0.7% in the three months to April, and by 0.6% in Quarter 1 2026, the recent monthly dip adds a layer of caution for policymakers. Unemployment also saw an increase, reaching 5.0% in the three months to March 2026.
"The conflict in the Middle East has significantly affected the outlook for UK inflation. The disruption the conflict has caused to energy supplies has led to a sharp rise in global energy prices. CPI inflation increased to 3.3% in March and is likely to be higher later this year."
Bank of England Governor Andrew Bailey, April 30, 2026
This statement from Governor Bailey in April highlights the MPC's ongoing concern about external shocks, particularly the impact of the Middle East conflict on energy prices, which could push inflation higher again despite recent falls. The Bank's mandate is to ensure these shocks do not become embedded in broader inflationary pressures.
The Other Side: Calls for Further Action
While the consensus among economists surveyed by Reuters points to an unchanged rate, not all MPC members are entirely convinced that the current stance is sufficient. Megan Greene, an MPC member, was quoted on 12 June 2026 as seeing "a growing case for raising interest rates as the Iran war drags on and raises the prospect of wider-spread inflationary pressures." This suggests that the debate within the committee is not entirely settled, and future hikes remain a possibility for some, with nearly 40% of Reuters poll respondents forecasting at least one hike before the end of 2026.
What this means for you
For savers, the Bank Rate holding at 3.75% suggests that the rates offered on savings accounts, including Cash ISAs, are likely to remain broadly stable in the short term. It's always worth reviewing your savings to ensure you're getting a competitive Annual Equivalent Rate (AER). For larger sums, consider utilising your annual ISA allowance (£20,000 for 2026/27) to shield interest from tax. First-time buyers under 40 might also consider a Lifetime ISA, which offers a 25% government bonus on contributions up to £4,000 per year, potentially adding up to £1,000 annually to your savings. Remember that interest earned on standard savings accounts above your Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate taxpayers) is subject to tax.
For those with variable rate mortgages, a stable Bank Rate means no immediate change to your monthly repayments, offering a degree of predictability. Fixed-rate mortgage holders will, of course, remain unaffected until their current term expires.
Finally, HMRC interest rates, which are linked to the Bank Rate, will also remain unchanged. Late payment interest stands at 7.75% (Bank Rate + 4%), while repayment interest is 2.75% (Bank Rate - 1%).
What Happens Next?
The decision from the Bank of England's Monetary Policy Committee will be announced at 12:00 (noon) UK time on 18 June 2026. This decision will be immediately effective. The MPC will convene again for its next scheduled meeting later in the year, with economists and the public alike scrutinising future inflation and growth data for any shifts in policy direction.
Sources
- Bank of England Monetary Policy Committee (MPC) — Statements from 30 April 2026 and 18 March 2026, and general mandate.
- Office for National Statistics (ONS) — CPI, CPIH, Core Inflation, Services Inflation data for April 2026.
- Office for National Statistics (ONS) — GDP data for April 2026 and Q1 2026.
- Office for National Statistics (ONS) — Unemployment data for March 2026.
- HMRC — Interest rate linkage to Bank Rate.
- Morningstar — Report on June 2026 MPC expectations and Iran war impact (June 13, 2026).
- Reuters poll — Economist expectations for June 2026 MPC meeting (June 12, 2026).
- Mortgage Introducer — Quote from MPC Member Megan Greene (June 12, 2026).
This is not financial advice. Seek independent financial guidance. Interest on standard accounts may be subject to tax above your Personal Savings Allowance.