UK MPC Holds Rates at 3.75% as Inflation Forecast Tops 3%
MPC•UK consumer inflation held at 2.8% in May while the Bank of England’s Monetary Policy Committee maintained the base rate at 3.75%. Economists now project inflation rising above 3% in late 2026 due to higher energy prices from the Iran war, dashing plans for further rate cuts.
1. Current Inflation and Rate Decision
Consumer Prices Index inflation remained at 2.8% in the 12 months to May, marking a modest improvement in food price growth. The Monetary Policy Committee opted to keep the base rate unchanged at 3.75%, ending a series of six rate cuts between August 2024 and December 2025.
2. Outlook and Forecasts
Rising global energy costs linked to the Iran war are expected to push inflation above 3% in late 2026, prompting nearly all economists to believe that further rate cuts are unlikely. Unemployment dipped to 4.9% in the three months to April while regular wages grew 3.4%, but these labour market shifts are seen as insufficient to trigger rate reductions.
