The Bank of England is almost certain to hold its benchmark interest rate at 3.75% when its Monetary Policy Committee meets on Thursday, 30 April 2026, according to all 62 economists surveyed in a Reuters poll published on 21 April. The unanimity of the forecast reflects the increasingly difficult balancing act facing policymakers, who must weigh persistently above-target inflation — driven in large part by the conflict in the Middle East — against growing signs that higher energy costs are beginning to weigh on economic activity.
Inflation rises to 3.3% on fuel prices
Data published by the Office for National Statistics on Wednesday showed that UK Consumer Prices Index inflation rose to 3.3% in March, a three-month high, from 3.0% in February. The increase was driven primarily by the largest jump in petrol and diesel prices in over three years, as disruption to oil supply routes through the Strait of Hormuz, following US and Israeli military action against Iran in late February, pushed global energy costs sharply higher. CPIH, which includes owner-occupiers’ housing costs, rose to 3.4%, while RPI inflation came in at 4.1%.
The March inflation data effectively ended any lingering market speculation that the MPC might deliver a surprise cut at this month’s meeting. “The Bank of England will almost certainly hold interest rates at 3.75% at its meeting next week, most likely in a unanimous 9-0 vote,” said Thomas Pugh, chief economist at RSM UK. Oxford Economics chief UK economist Andrew Goodwin agreed: “Most committee members seem keen to hold policy at its current restrictive level as they gather more information about how the energy shock is feeding through to the economy.”
Growth holding up — but for how long?
The decision to hold comes despite some unexpectedly resilient economic data. The ONS reported that the UK economy expanded by 0.5% in February, well ahead of the 0.1% forecast, before the Iran conflict had fully transmitted to domestic costs. UK retail sales volumes were also stronger than expected in March, boosted by fuel stockpiling as motorists filled their tanks ahead of anticipated further price increases. The OECD has since revised down its UK growth forecast for 2026 to just 0.7%, from a previous projection of 1.2% — the largest downgrade in its updated global outlook.
The April meeting will be particularly closely watched because it will be accompanied by the Bank’s first full Monetary Policy Report since the Iran conflict began. The report will contain new economic projections and is likely to show a materially higher near-term inflation path than the Bank forecast in February, alongside a weaker growth outlook. Investors will scrutinise the MPC’s language carefully for any signal about the timing of future moves: while most economists still expect two or three rate cuts before the end of 2026, the timing remains far more uncertain than it appeared at the start of the year, when the conflict in the Middle East was not a factor.
Mortgage market feels the pressure
The prospect of a prolonged period of elevated rates has begun to affect the mortgage market. Average five-year fixed mortgage rates, which had briefly dipped below 4% in early 2026, have since moved higher. The average UK house price fell by 0.5% between February and March to £299,677, according to Halifax, which attributed the decline to rising mortgage costs. Rightmove’s asking price index, however, showed a more resilient picture, with average asking prices rising 0.8% to £373,971 in April, suggesting that sellers remain confident even as the buyer market faces renewed affordability pressures.
— Edward Blackwell, London Capital Post
