BoE MPC meeting July 2026

Market Insights Economics 30 July 2026

BoE (July -26 ): Rates on hold, but support for a hike ratchets up • MPC votes 6 -3 to hold Bank Rate at 3.75%, with support for tighter policy continuing to build amid concerns over inflation persistence • Domestic disinflation and tighter financial conditions continue to offset the inflationary effects of higher energy prices, supporting the majority's wait -and -see approach • July's MPR restores a central forecast and points to inflation undershooting target on the market -implied rate path, suggesting markets may already be doing most of the MPC's work • Divisions deepen, strategy unchanged Nikesh Sawjani Senior UK Economist The Bank of England (BoE) left Bank Rate unchanged at 3.75% at its July policy meeting, a decision that was widely expected by both us and financial markets. However, the 6 -3 vote split highlighted a further increase in support for tighter Team mailbox policy, with Cat herine Mann joining Huw Pill and Megan Greene in voting for an immediate 25bp increase. Support for tighter policy has now increased steadily over recent meetings, rising from one member in April to two in June and three in July. That gradual shift reflects growing concern among some policymakers that the inflationary consequences of the conflict in the Middle East and the associated rise in energy prices could prove more persistent than initially expected. For those members, the k ey risk is that higher energy prices begin to influence inflation expectations, firms' pricing behaviour and future wage settlements, ultimately generating more lasting inflation pressures. However, for the majority, the case for keeping Bank Rate on hold remained compelling despite the increasingly uncertain and inflationary global backdrop. Policymakers pointed to "clear signs" that domestic inflationary pressures are easing and "little evi dence" that the latest energy shock has generated material second -round effects. As a result, most members remained comfortable maintaining what they view as an already restrictive policy stance while assessing whether inflation proves more persistent than currently anticipated. As with April, the July decision was accompanied by a Monetary Policy Report (MPR), with the updated forecasts broadly reinforcing that assessment.

Chart 1: Market continue to price in at least two 25bp rate hikes by year-end

Domestic disinflation offsets external pressures The increase in support for a rate hike should not obscure the fact that most MPC members still see little need to tighten policy immediately. While concerns that inflation could remain high for longer have grown, the majority believe the overall balance o f risks has changed relatively little in recent months. Those voting for a rate increase are primarily concerned that higher energy prices could eventually spread more broadly through the economy. The key risk is that businesses respond to higher costs by raising prices further, while workers seek higher pay to offset rising living costs. If those dynamics take hold, inflation could prove more persistent than currently expected. For the majority, however, the evidence does not yet point in that direction. Policymakers highlighted continued easing in domestic inflationary pressures and little sign that the recent energy shock has fed through into wider wage and price -setting behavi our. Labour market conditions continue to loosen, vacancies remain well below recent highs and private -sector wage growth has moderated markedly from the rates seen during the inflation surge of 2022 -23. Taken together, these developments appear to have re inforced the majority's confidence that easing domestic inflation pressures continue to offset, at least for now, the inflationary impact of higher energy prices. While concerns about inflation have clearly increased, most members still view the current ch allenge as primarily an external energy shock rather than evidence of a broader resurgence in domestic inflation.

Financial conditions continue to provide restraint A key theme underpinning the majority's position is that financial markets have already delivered a meaningful degree of additional…