Bank of England holds rate at 3.75% for sixth straight meeting and warns of hike if energy prices stay elevated

The Bank of England's Monetary Policy Committee voted 6-3 on September 16 to keep its benchmark Bank Rate at 3.75%, marking the sixth consecutive hold. The three dissenting members favored raising the rate by 25 basis points to 4%. The Bank warned that rates are likely to rise if high energy prices persist, with its short-term inflation forecast projecting CPI climbing to somewhat above 4% early next year, mechanically driven by energy costs. UK inflation had already risen to 3.1%, well above the 2% target.

The BoE's decision came a day after the U.S. Federal Reserve, under Chairman Kevin Warsh, delivered its first rate hike since 2023. Rather than pushing yields higher, the combination of the Fed hike and the BoE hold helped anchor global bond markets. UK yields fell alongside oil prices, which dropped to around $100 a barrel, and U.S. Treasury yields extended their decline. The benchmark 10-year Treasury yield, which had briefly crossed 5% following the Fed's move, eased back as resilient U.S. labor market data reinforced confidence that the Fed's hike could help bring inflation under control without triggering a sharp economic slowdown.