Bank of England keeps interest rates on hold
By Abigail Townsend
Date: Thursday 05 Feb 2026
(Sharecast News) - The Bank of England left the cost of borrowing on hold on Thursday, as widely forecast, following a surprisingly close vote.
The rate-setting Monetary Policy Committee agreed by a majority of five to leave interest rates at 3.75%. The remaining four members backed a cut, to 3.5%.
The decision to leave Bank Rate unchanged was long expected. But the closeness of the vote, alongside the MPC's accompanying minutes, boosted expectations for a cut in the coming months, potentially as early as March.
Inflation currently stands at 3.4%, ahead of the BoE's long-term 2% target, following a recent spike in tobacco prices and airfares. However, the BoE still expects the consumer price index to fall back to around target from April, on the back of changes to energy prices, slowing pay growth and easing services inflation.
It also revised down its growth forecast to 0.9% for 2026, from the 1.2% it predicted in November, and edged up unemployment rate expectations to 5.3% from 5.5%.
"The risk from greater inflation persistence has continued to become less pronounced, while some risks to inflation from weaker demand and a loosening labour market remains," the MPC noted.
"On the basis of the current evidence, Bank Rate is likely to be reduced further. Judgements around further policy easing will become a closer call."
Governor Andrew Bailey and chief economist Huw Pill both backed leaving rates on hold at Thursday's meeting.
However, while Pill argued that a "more prolonged period of policy restriction was likely to be warranted", Bailey, along with Catherine Mann, who also voted for no change, had "greater confidence" that this risk would be mitigated by the lower near-term path for inflation.
In a note, George Brown, senior economist at Schroders, said: "Today's rate decision was seen as a foregone conclusion, but the Bank's close vote to hold rates suggests cuts are not a matter of if, but when."
Rabobank said: "Cooling demand, fading inflation risks and a softening labour market all support the case for easing. If not March, then April remains the most plausible window for the next cut."
Andrew Wishart, senior UK economist at Berenberg, said: "The wafer-thin majority...indicates that it will not be long before the BoE lowers interest rates again. The 5-4 vote was much closer than the consensus - 7-2 - and our own prediction.
"We predict a larger 75 basis point reduction in Bank Rate this year. Inflation is likely to remain close to 2% from the second quarter onwards. This will allow the BoE to shift its focus to stabilising employment with three more 25bps cuts."
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN