Bank of England’s latest decision on base rate

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5-4 to maintain the base rate at 3.75% at its February meeting⁽¹⁾.

Four members of the MPC had voted instead to reduce Bank Rate by 0.25 percentage points to 3.5%.

In setting out the context to the vote, the MPC said: ‘Although above the 2% target currently, CPI inflation is expected to fall back to around the target from April, owing to developments in energy prices including from Budget 2025.

‘Reflecting the impact of monetary policy, and consistent with evidence of subdued economic growth and building slack in the labour market, pay growth and services price inflation have generally continued to ease. The risk from greater inflation persistence has continued to become less pronounced, while some risks to inflation from weaker demand and a loosening labour market remain.’

In discussions, the MPC acknowledged that CPI inflation had fallen from 3.8% in September last year to 3.4% in December.

It noted that the extent to which domestic inflationary pressures fall will be influenced by developments in the labour market and how much economic slack acts against such pressures.

All members of the committee agreed on the importance of inflation holding sustainably at 2% in the medium term.

On global economic activity, the Bank of England’s Monetary Policy Report said activity has been more resilient than expected at the time of the last report in November. Global financial conditions have eased and are anticipated to boost UK-weighted world GDP growth in the coming quarters by offsetting the drag of tariff and trade policy uncertainty.

Commentary on business investment intentions was less positive. While investment growth in the year to 3Q2025 was fairly robust, fuelled by investments in machinery and information communications technology, the wider economic outlook is currently not conducive for investment, according to contacts of the Bank’s Agents.

The resumption of delayed investment projects is mainly intended to boost efficiency and reduce costs.

Reacting to the decision, Dr David Crosthwaite, chief economist at BCIS, said: ‘Given the uptick in consumer inflation in December and following the recent rate cut, it was no great surprise that the Bank of England voted to keep the base rate unchanged today at 3.75%. Inflationary pressures remain persistent and therefore we will likely have to wait for any further cuts to interest rates until later in the year, assuming that any inflationary pressures subside.

‘Of more growing concern is the overall state of the economy. With growth stagnating, unemployment rising and the ever-changing geopolitical situation impacting confidence, the question is how much longer can the Bank of England wait? Economic stimulus from the government appears to be having little effect so reducing the cost of borrowing might kickstart private investment which is badly needed to get the economy out of the slow lane.’

The MPC’s next vote will be published on Thursday 19 March 2026.

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^{(1) Bank of England – Bank Rate maintained at 3.75% – February 2026 Monetary Policy Summary and Minutes – here}