Bank of England Holds at 3.75% Again — But a 6-3 Split Keeps a November Hike Firmly on the Table

The Bank of England's Monetary Policy Committee held Bank Rate at 3.75% on 17 September, the sixth consecutive meeting without a change — but the substance of the decision was less settled than the headline number suggests. The vote split 6-3, exactly matching July's outcome, with Chief Economist Huw Pill, Megan Greene and Catherine Mann again voting for an immediate quarter-point rise to 4%. What's changed since July isn't the vote count. It's how much weight markets are now putting on that dissent actually prevailing at one of the Committee's next two meetings.

The three dissenters made their case in specific, individually attributed terms rather than a single shared statement. Catherine Mann pointed to the Bank's own short-term forecast showing CPI inflation rising above 4% in early 2027, arguing that raising Bank Rate now represents better risk management given genuine uncertainty about how inflation dynamics and second-round effects actually play out. Megan Greene cited a cluster of specific inflationary risks — the ongoing Iran conflict, AI-related supply constraints, and the El Niño weather pattern — as reasons the balance of risk had shifted toward acting sooner. Huw Pill argued that an immediate move would have sent a clear signal of the Committee's commitment to its price stability mandate at a moment of genuine geopolitical and data uncertainty, adding that second-round effects, once they take hold, are considerably more costly to reverse than to prevent.

The six members who held their ground — Governor Andrew Bailey, Sarah Breeden, Swati Dhingra, Clare Lombardelli, Dave Ramsden and Alan Taylor — weren't dismissing those concerns so much as arguing for patience. Their reasoning centred on the absence, so far, of clear evidence that higher energy costs are actually feeding through into wage settlements and underlying prices at scale, alongside a view that already-tight financial conditions were doing some of the necessary work without a further explicit hike. Two of the six, Dhingra and Taylor specifically, put particular weight on remaining slack in the economy and on how restrictive Bank Rate already is relative to peer economies.

Even so, the Committee's own language moved in a more hawkish direction than the unchanged vote count implies. The minutes explicitly judged the risks to the inflation outlook as tilted further to the upside than they'd been at July's Monetary Policy Report, and stated the Committee stands ready to act as necessary to keep inflation on track for the 2% target. That's the kind of phrasing markets read closely, and they read it as a genuine signal this time: LSEG pricing data showed the probability of a September hike climbing to roughly 30% in the days before the decision, up from under 10% just a week earlier, while a hike at the following meeting was, by the time of the decision, close to fully priced in by markets.

This meeting also came without a fresh quarterly Monetary Policy Report, since it fell on the Bank's interim decision calendar rather than a forecast-round meeting — meaning no updated growth or inflation projections accompanied today's vote. That makes November's meeting, which does fall on a forecast round with new projections attached, the more likely moment for the Committee to formally shift its guidance if the case for tightening continues to build, rather than today's interim decision.

The inflation backdrop driving this debate is itself more nuanced than the headline number alone suggests. August's CPI print, released the morning before this decision, showed headline inflation at 3.1%, up from July's 2.9% — but core inflation held flat at 2.6% and services inflation, the measure the Committee watches most closely for genuine domestic price pressure, was also unchanged, at 3.4%. The rise was concentrated almost entirely in transport and fuel costs. That distinction matters directly to how today's decision should be read: the six-member majority is still betting that a fuel-driven headline spike, sitting alongside flat core and services measures, doesn't yet justify a hike — while the three dissenters are betting that waiting for firmer evidence risks acting too late once energy-driven inflation does start feeding into wages.

In a separate but consequential decision announced alongside the rate hold, the Committee voted unanimously to reduce the Bank's remaining stock of gilts held for monetary policy purposes to zero, under a multi-year unwind plan running through to September 2034. That's a distinct decision from Bank Rate itself, concerning the size of the Bank's balance sheet rather than the price of borrowing, but it lands at a moment when gilt market conditions are already under real strain — 10-year and 30-year yields have both climbed to multi-decade highs in recent weeks — and a confirmed, extended unwind timetable gives the market at least some clarity on the pace of one source of ongoing gilt supply, even as the broader yield picture remains driven by factors well beyond the Bank's own balance sheet decisions.

For anyone with a mortgage decision pending, the practical read is that today's hold changes nothing directly for tracker or variable-rate borrowers, whose rates are tied to Bank Rate and have therefore not moved. Fixed-rate pricing is a different story, since it responds to swap rates and gilt yields rather than the base rate itself — and a Committee explicitly signalling upside risk, sitting alongside gilt yields already near multi-decade highs, is not the kind of backdrop that typically pulls fixed mortgage pricing lower. With the next decision due 5 November, this time accompanied by fresh economic projections, that meeting now looks like the more consequential test of whether September's hawkish tone translates into an actual rate change.