Bank of England holds rates at 3.75% as tight vote fuels debate over timing of next cut

The Bank of England (BOE) held its benchmark interest rate steady at 3.75% at its first policy meeting of 2026, with policymakers split over the next move as inflation remains stubborn and growth signals mixed.

The nine-member Monetary Policy Committee voted 5-4 to keep rates on hold, a much narrower margin than the 7-2 split economists polled by Reuters had expected. Four members favoured an immediate 25 basis-point cut.

The sterling weakened following the decision, slipping 0.6% against the dollar

to $1.356.

In its statement, the BOE said policy is being set to ensure inflation “not only reaches 2% but remains sustainably at that level in the medium term,” adding that while rates are “likely to be reduced further,” decisions on easing are becoming “a closer call.”

Economists say the narrow vote highlights growing divisions within the MPC. Andrew Wishart, senior UK economist at Berenberg said early 2026 data point to “stronger demand and stickier inflation” than previously expected. As a result, Berenberg now expects the BOE’s first rate cut of the year at the April 30 meeting, with three 25 bps cuts likely over 2026, CNBC International reported.

Edward Allenby, senior UK economist at Oxford Economics believes that further easing is coming but warned of a gradual path. “The current bout of mild stagflation is likely to keep the committee divided on the timing of these future cuts,” he said, adding that late April appears the most likely window for the next move.

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Not all economists agree. Dani Stoilova, UK and Europe economist at BNP Paribas Markets 360, highlighted that a cut could arrive sooner. She expects a trim as early as March, though potentially followed by a prolonged pause, with rates reaching a terminal level of 3% by mid-2027, CNBC International report added.

For now, the BOE appears content to wait for clearer evidence on inflation, pay growth and economic slack — leaving markets finely balanced over when the easing cycle will resume.

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