Bank of England Keeps Rates at 3.75% in Close Vote — Dovish Signals Ahead

The Bank of England (BoE) has decided to keep its main interest rate unchanged at 3.75%, in a narrow 5‑4 vote by the Monetary Policy Committee (MPC). The decision signals a cautious, data‑dependent approach to monetary policy as the U.K. economy continues to wrestle with inflation that remains above the BoE’s 2 % target.

While inflation has eased from previous highs, it still stands well above target — around 3.4 % as of December 2025 — and wage pressures remain a key concern for policymakers. Some MPC members supporting a hold cited the need for more evidence of sustained disinflation before endorsing further rate reductions.

Governor Andrew Bailey and other officials also underscored that although the current stance is accommodative, markets should expect future decisions to be guided strictly by incoming data on inflation, growth, and labor market dynamics. Investors have already pared back expectations for immediate cuts.

The British pound and gilt markets reacted to the decision with some volatility, reflecting investor uncertainty around future rate paths amid mixed economic signals and political developments at home.