Bank of England Holds Firm: Interest Rates Stay at 3.75% Amid Stubborn Inflation
LONDON (AP) — The Bank of England held its main interest rate steady at 3.75% on Thursday, signaling a cautious pause in its monetary easing campaign. The decision comes as inflation, while cooling, remains persistently above the central bank's 2% target, and recent economic data suggests the UK economy is gaining unexpected momentum.
The Monetary Policy Committee's vote to keep rates unchanged marks a shift from the steady, quarterly reductions implemented over the past 18 months. The last cut in December, a 25-basis-point move, was widely seen as the beginning of a longer easing cycle. However, a raft of positive indicators from the first quarter of 2026—including robust retail sales and business investment—has forced policymakers to reassess the timing of future cuts.
"The resilience in demand, particularly in the services sector, is presenting a dilemma," said Andrew Wishart, senior UK economist at Berenberg Bank. "The early data covering 2026 hint at stronger demand and stickier inflation than we had expected, complicating the path back to the 2% target."
UK inflation currently stands at 3.4%, a significant drop from its peak but still high enough to erode household purchasing power. The central bank now faces the delicate task of balancing the need to suppress price growth without stifling the fragile economic recovery. Lower interest rates stimulate growth by reducing borrowing costs for consumers and businesses, but they also risk reigniting inflationary pressures.
The political stakes are high. The Labour government, which swept to power in the 2024 general election, has seen its popularity wane amid cost-of-living pressures. A swift return of inflation to target, enabling deeper rate cuts, would provide much-needed economic relief. The Bank's current hold suggests such relief may be delayed, with future decisions hinging on incoming wage growth and services inflation data.
/// USER COMMENTARY ///
Michael Thorne, Financial Analyst, Bristol: "A prudent and necessary hold. The Bank is rightly looking beyond the headline inflation drop. Premature easing could undo all the hard-won progress and force a more painful reversal later. Data-dependence is the only sensible policy right now."
Sarah Chen, Small Business Owner, Manchester: "This 'cautious' stance feels like a death by a thousand cuts for my high street shop. My loan repayments are crippling, and consumer confidence is shaky. They're so focused on theoretical inflation risks they're ignoring the very real recession risks on the ground."
Professor Eleanor Vance, Economics Department, University of Edinburgh: "The MPC is navigating a classic policy trade-off. The stronger growth data is welcome, but if it's driven by demand exceeding the economy's capacity, it's inherently inflationary. Today's pause is a signal that their priority remains price stability, as it should be."
David "Axe" Croft, Pensioner, Cornwall: "It's an absolute disgrace. They've forgotten who they're supposed to protect. Savers and pensioners are being sacrificed on the altar of growth. This stickiness in inflation is a direct result of their earlier dithering. Keep rates high until the job is done!"