LONDON (dpa-AFX) - The Bank of England maintained its interest rate but raised market expectations for a rate hike as policymakers said they stand ready to act as necessary to bring inflation back on track.
The Monetary Policy Committee, governed by Andrew Bailey, voted unanimously to maintain Bank Rate at 3.75 percent.
The current rate was the lowest since June 2023. Previously, the BoE had reduced the rate by 25 basis points each in August and November last year.
The committee said it will continue to monitor closely the situation in the Middle East and its impact on global energy supply and energy prices.
The bank stated that it 'stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2 percent target in the medium term.'
Consumer price inflation is expected to be close to 3.5 percent in March, which was almost 0.5 percentage point higher than projected in February.
Inflation was previously projected to ease in the second quarter of 2026 as one-off price increases in April 2025 drops out of the annual comparison. However, given higher fuel prices, the decline between the first quarter and second quarter was projected to be moderate.
As a result, inflation was expected to be around 3 percent in the second quarter, rather than 2.1 percent projected in the February report.
'It was too early to judge how large any second-round effects from the new energy price shock would be through wage and price-setting,' the bank said.
Further, policymakers observed that economic activity remained subdued in the first quarter of 2026 with monthly GDP flat in January. The bank staff projected underlying GDP growth to be around 0.1 percent to 0.2 percent in the first quarter.
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