Bank of England holds rates at 3.75% despite continued geopolitical tensions – LCP
Investment Economy
Despite ongoing tensions in the Middle East and an associated surge in oil prices, the Bank of England’s Monetary Policy Committee (MPC) decided to keep interest rates on hold at 3.75% today. The decision was split 6-3, with all members voting in line with their previous votes in late July 2026.
Natalie Brain, Partner in LCP’s investment team, commented:
“The MPC’s decision to keep rates at 3.75% highlights the fine line the Bank of England continues to tread. While UK headline CPI inflation over the year to August 2026 rose to 3.1%, core inflation remained steady, as did services inflation, suggesting limited spillover from energy price rises into the wider economy. In addition, the UK labour market remains soft, with the unemployment rate of 4.9% over the quarter to July 2026 reflecting a rise of 0.2% over the year.
However, the renewed escalation in the Middle East and relatively stable UK GDP growth continues to place pressure on the outlook for inflation. The Bank continues to adopt a wait-and-see approach, maintaining tight financial conditions while retaining the option of a rate rise later in the year, should energy-related pressures remain persistent.”
She added:
“We have seen interest rate rises from both the US Federal Reserve and the European Central Bank this week and last week, respectively, in light of elevated inflation pressures and a strong domestic economy in the case of the US. The MPC’s next meeting on 5 November 2026, scheduled a week after the much anticipated Autumn Budget on 28 October 2026, will be closely watched. Institutional investors and trustees should remain mindful of potential market volatility associated with major monetary and fiscal decisions over the coming months.”
