Bank of England holds at 3.75 per cent, breaking with the Fed and the ECB
A sixth consecutive hold, paired with a warning that rates are likely to rise if high energy prices persist.
Assembled by Claude from 10 sources at 8 outlets · Thursday, September 17, 2026, Morning edition, 10:14 AM EDT · no human byline
What happened
The Bank of England kept its key interest rate unchanged at 3.75 per cent on Thursday theguardian.comwsj.com. It is the sixth hold in a row bbc.co.uk. The decision came a day after the Federal Reserve raised US rates for the first time in three years, and after the European Central Bank had raised rates twice since June bbc.com.
The hold is conditional rather than settled. The Bank said rates are likely to rise if high energy prices continue bbc.co.uk, and warned that the war could force future rises theguardian.com. It said inflation is on track to reach 4 per cent by early next year theguardian.com. The Times had reported the monetary policy committee was expected to split 6 to 3 in favour of leaving borrowing costs alone thetimes.co.uk.
Why it matters to investors
UK inflation rose to 3.1 per cent in August, with core inflation stable at 2.6 per cent, a reading described as offering some relief ahead of the decision virginiabusiness.com. CNBC noted the Bank was still expected to hold even after inflation reached 3.1 per cent, with energy costs keeping pressure on prices cnbc.com. The Bank said it is monitoring for signs that higher energy costs are spilling over into everyday prices wsj.com.
The source of the August increase is the same one the Fed cited. Petrol and diesel price rises pushed UK inflation higher, alongside summer holiday costs and disruption to global oil supplies caused by the Middle East conflict bbc.co.uk.
The divergence is what matters for sterling and gilts. The European Central Bank raised rates for the second time this year earlier this month and struck a hawkish tone as energy prices rise wtvbam.com. The Fed hiked on Wednesday bbc.com. London alone has chosen to wait, and the Wall Street Journal devoted its explanation to why the Bank did not follow wsj.com.
What to watch
The committee split is the leading indicator. A vote expected at 6 to 3 in favour of holding leaves a minority already arguing the other way thetimes.co.uk. Any narrowing of that margin at the next meeting would be the first hard evidence of a turn, since the Bank has already conceded the direction of travel is up if energy prices hold bbc.co.uk.
Energy is the swing variable the Bank named itself bbc.co.ukwsj.com. If oil-driven pressure persists, the path it has described leads to a rise rather than a cut, and the inflation forecast it published points to 4 per cent early next year rather than a return to target theguardian.com. For UK investors, that combination, a policy rate on hold while inflation is still climbing, means real rates are falling even as they rise almost everywhere else wtvbam.com.
Sources
- theguardian.com: Bank of England holds interest rates at 3.75% but warns war could force future rises (2026-09-17)
- bbc.com: Bank of England holds interest rates at 3.75% despite rising inflation - BBC News (2026-09-17)
- wsj.com: Why the Bank of England Didn't Follow the Fed in Raising Interest Rates - WSJ (2026-09-17)
- bbc.co.uk: Interest rates held but Bank signals rise if energy prices stay high (2026-09-17)
- cnbc.com: Bank of England set to defy Fed's rate-hike lead, despite rising inflation - CNBC (2026-09-17)
- virginiabusiness.com: UK inflation hits 3.1% but data offers some relief for Bank of England - Virginia Business (2026-09-17)
- thetimes.co.uk: Bank of England set to keep UK interest rates on hold - The Times (2026-09-17)
- wsj.com: The Bank of England kept its key interest rate unchanged, holding steady at a time when the Federal Reserve and European Central Bank have raised rates (2026-09-17)
- wtvbam.com: Major central banks on tightening path amid energy price shock | WTVB (2026-09-17)
- bbc.co.uk: Petrol and diesel price rises push UK inflation higher (2026-09-16)