The Bank of England’s Monetary Policy Committee held Bank Rate at 3.75% on Thursday 30 April 2026, in an 8-1 vote with the Bank’s chief economist Huw Pill the lone dissenter calling for a 25-basis-point hike to 4.00%. The decision came against a backdrop of CPI inflation at 3.3% in March 2026 — well above the 2% target — and a Middle East conflict that has fundamentally rewritten the rate-cut script that markets had been pricing for the entire year. Governor Andrew Bailey told reporters he could not give a “cast-iron assurance” against further hikes even if oil prices fall.
The 8-1 vote: Pill’s hawkish stand
The April vote was the most divided MPC decision in over a year. Eight members voted to hold, one — chief economist Huw Pill — voted to hike to 4.00%. The MPC’s accompanying minutes noted: “CPI inflation has increased to 3.3%, and is likely to be higher later this year as the effects of higher energy prices pass through. There is a risk of material second-round effects in price and wage-setting, which policy would need to lean against.” But the Bank also acknowledged “the labour market continues to loosen, and a weakening economy could contain inflationary pressures.” The compromise: hold for now, watch the Q2 data carefully.
The inflation projection: it gets worse before better
The most striking aspect of the April 2026 Monetary Policy Report was the upward revision to the inflation profile. Based on energy market pricing in mid-April, the BoE now projects:
- Q2 2026: CPI at 3.1%
- Q3 2026: CPI at 3.3%
- Q4 2026: “to rise somewhat further”
The Bank’s scenario analysis — published alongside the April decision — covers a range from 3.5% peak inflation (mild scenario) to 6.2% peak (severe scenario). In the severe scenario, Bank Rate could rise to 5.25% by 2027, a tightening that would be brutal for mortgage holders, businesses and consumers alike. National Institute of Economic and Social Research (NIESR) has separately suggested rates could climb to 4.5% if energy costs persist for a full year. Ben Zaranko of the IFS said an interest rate rise above 4% “could not be ruled out.”
The Bailey caveat: no cast-iron assurance
Speaking after the decision, Governor Andrew Bailey said what happens next will “depend on the size and duration of the energy price shock,” adding pointedly that he “can’t give a cast-iron assurance there won’t be a rate increase, even if oil prices drop going forward.” The remark was a reversal of the dovish framing dominant in the December 2025 cut from 4.00% to 3.75% (a 5-4 split), and signalled a new “meeting-by-meeting” approach for the rest of 2026.
The forecast spread: from holds to hikes
City forecasts have fragmented dramatically since the Iran war started:
- JP Morgan: predicts a rate increase in June 2026
- NIESR: rates could climb to 4.5% if energy costs persist for a year
- Oxford Economics: BoE will hold at 3.75% for the rest of 2026 and “well into 2027”
- Sylwia Hubar (Natixis UK economist): “Should this conflict continue, potentially fuelling inflation while adversely affecting economic growth, the Bank of England may ultimately keep the Bank Rate unchanged this year.”
- Markets (mid-April pricing): now expect 1-2 cuts in 2026, down from 2-3 cuts pre-conflict
The 18 June meeting: the next big test
The next MPC decision arrives at noon UK time on Thursday 18 June 2026, followed by 30 July and 17 September. By 18 June, the MPC will have:
- The 14 May Q1 GDP first quarterly estimate (consensus 0.5%-0.6%, but with BoE concern over flawed seasonal adjustment)
- April CPI inflation data (due 21 May)
- April labour market data (due 13 May, including wages)
- Two further MPC inflation expectations surveys
- The post-election political settlement following 7 May local elections
Quantitative tightening: another £70bn off the balance sheet
Beyond rates, the BoE is continuing its quantitative tightening (QT) programme. At its September 2025 meeting, the MPC said it would reduce the assets it holds by a further £70 billion over the year to September 2026, partly through active sales of UK government bonds. This is putting upward pressure on long-dated gilt yields independently of Bank Rate, and is one reason the UK 30-year gilt recently traded at its highest yield since the 1998 LTCM crisis.
The ECB and Fed comparison
The international rate picture remains divergent. The European Central Bank kept its main rates unchanged on 30 April 2026, with the deposit rate at 2.0%, after eight cuts between June 2024 and June 2025. The ECB also flagged Middle East inflation pressure but is unwinding QE more slowly than the BoE. The US Federal Reserve’s next meeting concludes on 17 June 2026. With the Fed funds rate currently at 4.25%-4.50%, the dollar-sterling differential has narrowed slightly since April, supporting modest GBP recovery against the greenback.
Reporting from London on Friday 8 May 2026, with reference to the BoE 30 April 2026 decision, the April 2026 Monetary Policy Report, and Bloomberg/FT market pricing as of 7 May.
