Bank of England Holds Interest Rate Steady at 3.75% for Fourth Consecutive Meeting
Alina Collins
The Bank of England voted 7-2 to hold its benchmark rate at 3.75% for a fourth straight meeting; falling Middle East oil prices and a cooling labor market gave room to wait, but institutions are sharply divided on the path ahead.
What does the 7-2 vote tell us?
Seven of nine MPC members voted to hold; two pushed for a 25-basis-point hike — hawkish voices exist but fell short.
This means → the committee is not aligned on inflation risk, yet the majority sees no need to act now.
Sterling barely moved after the decision, trading at 1.3227 against the dollar. Market pricing for full-year cumulative hikes stayed anchored at 35 basis points — virtually unchanged.
Where does the BoE's confidence to wait come from?
May CPI held at April's 2.8% year-on-year, running below the BoE's own projected path — inflation is not accelerating.
April GDP contracted month-on-month unexpectedly, easing demand-side price pressure on its own.
The labor market is cooling in step: the February–April unemployment rate fell to 4.9%, and private-sector wage growth slowed further. In plain terms = the risk of a wage-price spiral is fading, giving the BoE room to sit tight.
Why are global central banks going in different directions?
In the same week, the Fed held at 3.50%–3.75%, while the ECB and the Bank of Japan both raised rates at their latest meetings.
The core split is how to read the energy shock from the Iran conflict: the ECB and BoJ treat it as an inflation threat to front-run; the Fed and the BoE treat it as a transitory shock and choose to wait.
This means → if the US–Iran preliminary peace deal lands this week, the wait-and-see camp's bet pays off; but if the conflict flares again, the ECB's pre-emptive move looks safer.
Oil prices have fallen — is the risk really over?
After the Strait of Hormuz shipping-restart agreement, oil prices that spiked during the conflict dropped quickly, easing imported-inflation fears.
But Governor Bailey warned explicitly at the press conference: the Middle East still carries "ongoing instability" risk, and underlying pressures from the Iran conflict have not disappeared.
In plain terms = cheaper oil is good news, but the BoE is not treating "conflict over" as a settled fact for policy.
How are institutions betting on the next move?
Goldman Sachs: rates unchanged all year, no cuts until 2027 at the earliest; inflation peaks at 3.7% in Q4 2026.
Société Générale: also expects no move this year, but warns that if the US–Iran conflict persists, a 50–75 bp hike may be the right response.
BNP Paribas is the most aggressive, forecasting two rate hikes before year-end.
This means → the only consensus is "no move short-term"; beyond six months, three houses point in three different directions.
What to watch next?
Actual progress on Strait of Hormuz shipping recovery — a signed deal does not mean ships are moving.
Whether the oil-price pullback is sustainable or just a short-term bet on a ceasefire.
Q2 wage-negotiation data — if pay growth rebounds, the risk of second-round inflation spillover lands back on the table.
Content is for reference only, not financial advice.