Bank of England Expected to Hold Rates at 3.75% in September
nashnova research
All 65 economists polled by Reuters expect the Bank of England to hold its benchmark rate at 3.75% on September 17; oil prices are nearing $100 a barrel but second-round inflation effects have yet to materialise, and the gulf between market pricing and economist forecasts will be the key repricing variable after the decision.
Why do all economists agree on "hold"?
Reuters polled 65 economists between September 4 and 8. The result: 100% expect rates to stay at 3.75%.
The core logic: the US-Israel war against Iran has pushed Brent crude back toward $100 a barrel, but higher energy costs have not yet fed through into broader inflation data.
This means → economists see no "second-round effects" — the chain where energy costs push up wages and service prices — so most MPC members lack sufficient grounds to hike.
Inflation at 2.9% — how far from target?
UK inflation currently sits at 2.9%, above the BoE's 2% target. Goldman Sachs senior economist James Moberly expects it to peak at 3.3% in November before retreating.
3.3% is above the BoE's own forecast, but Moberly argues it is still not high enough to trigger second-round-effect concerns.
In plain terms = inflation is rising, but not to the point where the BoE feels compelled to hike — and the turning point may arrive faster than the central bank itself expects.
What will the September vote split look like?
At the July meeting, 3 of 9 MPC members voted to raise rates, up from 2 previously.
HSBC economist Elizabeth Martins noted that one more inflation and labour-market data release remains before September 17, but "conditions are not yet met for the hold camp to change their votes."
This reflects a broader dynamic: the recent sharp rise in global bond yields has already tightened financial conditions and risks pushing up mortgage rates — effectively doing some of the BoE's tightening work and giving policymakers room to wait.
Why are economists and markets at odds?
Nearly 90% of economists (57 of 65) expect rates to stay unchanged for the rest of this year. Only 8 see a hike to 4.00%.
Financial-market futures, by contrast, price in at least three hikes by mid-2027, with the first expected in November.
This means → if economists are right, markets are priced too hawkishly and yields could fall after the September 17 decision. If inflation surprises to the upside, markets will have been ahead of the curve.
Where do rates and the economy go from here?
The median economist forecast: the MPC's next move will be a 25-basis-point cut in Q3 2027, later than the August survey predicted.
Inflation forecasts: 3.1% average in 2026, falling to 2.5% in 2027 and 1.9% in 2028 — meaning the 2% target is not reached until 2028.
Growth is forecast at 1.1% and 1.2% for 2026 and 2027, picking up to 1.5% in 2028. In plain terms = slow growth paired with a long inflation glide-path — the UK economy is in the slow lane for the next two years.
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