Bank of England Holds Interest Rate at 3.75%

The Bank of England kept its benchmark interest rate unchanged at 3.75% in February, in line with market expectations, following a closely split vote that highlighted growing divisions among policymakers over the outlook for inflation and economic growth.

The Monetary Policy Committee (MPC) voted 5–4 in favor of maintaining the rate, as officials sought to balance easing inflationary pressures against mounting risks from a weakening economy. Four committee members backed an immediate 25-basis-point rate cut, underscoring increasing disagreement within the MPC.

Inflation remains above the Bank’s 2% target, but policymakers expect it to move closer to that level starting in April, partly due to developments in energy prices. At the same time, indicators such as wage growth and services-sector inflation have continued to slow, reflecting subdued economic momentum and a growing surplus in the labor market.

Policymakers noted that the risks of persistently high inflation have diminished, while softer demand and easing labor market conditions now pose downside risks to the broader economy.

Since August 2024, the Bank of England has reduced its main interest rate by a cumulative 150 basis points, significantly easing monetary policy constraints. The MPC said further rate cuts remain possible but emphasized that any future decisions will be data-dependent, particularly on incoming inflation figures, and will require careful calibration.