The Bank of England decided on the 17th to hold its policy rate at 3.75%, again by a 6-3 majority. Three members of the Monetary Policy Committee backed a rise to 4%, matching the expectations of a Reuters poll of economists. The central bank projected that UK inflation would exceed 4% in early 2027, and Governor Bailey indicated that a prolonged conflict in the Middle East could make monetary tightening necessary. It also made the unexpected decision to halt all government bond sales for the next six months. The Bank raised its forecast for third-quarter economic growth to 0.4% from 0.1%, while noting that inflation, which stood at 3.1% in August, could be slightly above 4% in early 2027.
BoE held at 3.75% with three members voting for a hike and signaled possible tightening as inflation tops 4%, pushing gilt yields up (bond prices down).
