Bank of England Holds Rates at 4.25% as Inflation Concerns Persist

The Bank of England's Monetary Policy Committee voted 6-3 to hold interest rates at 4.25% at its April 2026 meeting, citing persistent services inflation and uncertainty in global trade as reasons for caution.

n

The Decision

n

The three dissenters — Deputy Governor Sarah Breeden and external members Swati Dhingra and Alan Taylor — voted for an immediate cut to 4.0%, arguing that the economy was weakening faster than the central forecast suggested.

n

Governor Andrew Bailey indicated that the committee was "increasingly comfortable" with the inflation outlook but needed further evidence of sustained progress before acting. Services inflation remains at 4.1%, comfortably above the level consistent with the 2% CPI target.

n

Market Reaction

n

Markets had priced in approximately a 40% probability of a cut at this meeting. Sterling rose marginally on the hold decision. Two-year gilt yields fell slightly as markets pushed their expectation of the next cut into June.

n

What Comes Next

n

The Bank's next decision is at the June meeting, where a cut looks more likely. The OBR's latest forecast, published last month, projected two further cuts in 2026, bringing the base rate to 3.75% by year end. Several analysts now think this may prove too aggressive.

n