The Bank of England yesterday announced that Bank Rate stayed at 3.75% after its February meeting. The decision came from the Monetary Policy Committee, which meets 8 times each year to guide price stability.
The Bank explained its thinking in plain terms. It said, “we have held rates today after cutting rates six times since August 2024.”
Data from the Bank of England shows inflation at 3.4%, which is a massive drop if you compare it to the high of over 10%, 3 years ago. The Bank expects inflation to come back to its 2% target later this spring, slightly quicker than earlier forecasts.
Why Did The Bank Keep Bank Rate At 3.75%?
In its update the Bank said, “We need to be sure that inflation will fall to 2% and stay there, so we have held rates today.”
The Bank Rate acts as the indicator for many other interest rates across the economy. Mortgage costs, loan rates and savings returns tend to follow its direction. The Bank uses this rate as a tool to keep inflation stable over time.
The Monetary Policy Committee also described the risks it carries at each meeting. Its statement said monetary policy is set “to balance the risk that higher inflation is more persistent against the risk that weaker labour demand and household spending take inflation below target.” That balance shaped the February call.
Households and firms have already seen borrowing costs ease after 6 rate cuts since August 2024. The pause allows policymakers to watch how those earlier moves feed through to prices and spending.
What Could Happen To Interest Rates From Here?
The Bank opened the door to lower rates later in 2026 if conditions match expectations. It said, “if the economy evolves as we expect, there should be scope for some further cuts to Bank Rate this year.”
The next rate decision is due on 19th of March. Each meeting uses the latest inflation data and economic readings…
Inflation falling back to 2% forms the narrative for any future move. The Bank said it will set “whatever interest rate is necessary to make sure that inflation stays low and stable.” That promise determines every decision from here on out…
Experts share their views on the news:
Our Experts:
Matthew Allen, Lecturer in Economics, University of Salford
“Since August 2024, interest rates have been cut six times, reflecting the Bank of England’s earlier confidence that inflation was easing. However, the recent rise in inflation has clearly made policymakers more cautious, and a decision to hold rates signals that price pressures have not fully disappeared.
“Those expecting further relief may be disappointed, particularly households still grappling with cost-of-living pressures and businesses already feeling the effects of recent tax rises, including higher employer costs. For many firms, this combination is squeezing margins and limiting their ability to invest or pass on savings to consumers.
“The rise in inflation is being driven by a mix of factors. Energy and food prices remain volatile, wage growth is still relatively strong as firms compete for workers, and global supply chains continue to face disruption due to geopolitical tensions and trade frictions. At the same time, higher taxes and regulatory costs for businesses are feeding through into prices, as firms attempt to absorb or pass on these additional expenses.
“With many of these pressures coming from outside the UK economy, and outside the Bank’s direct control, the Bank of England is walking a fine line. Cutting rates too quickly risks reigniting inflation, while holding them for longer prolongs the strain on households and businesses.
“The big question now isn’t when rates fall, but whether inflation genuinely cools without pushing the economy into prolonged stagnation.”
Victor Trokoudes, Founder and CEO, Plum
Economic analysis
“The MPC has decided to hold the base rate at 3.75% as widely expected, albeit it was a closer call than anticipated.
“Major central banks are now taking increasingly different monetary policy approaches, having largely coordinated the descent from the top of the rate cycle, whether deliberately or not. The EU looks to be holding rates, while there is pressure in the US for further rate cuts, despite inflationary pressures rising. In contrast, Australia’s central bank increased its benchmark rate.
“Positively for the Bank of England (BoE), the green shoots of UK economic growth are beginning to break through. GDP growth improved to 0.3% in November, while the S&P PMI index, a measure of corporate activity, rose to 53.9 in January, the highest since April 2024.
“It appears the base rate isn’t far from reaching its neutral rate based on Governor Bailey’s comments, subject to the economy continuing to hum along, so people shouldn’t expect too many rate reductions this year. The markets predict two cuts in 2026, with the first arriving by June. Given the close-run decision in December to reduce the base rate when it seemed like a sure-fire decision to many observers and traders, it appears the BoE will need some convincing to cut rates further.
“As long as inflation remains above 3% (it was 3.4% in December), there will be concern among rate-setters that this could spur a longer period of price pressures. Having mistakenly described post-Covid rise in inflation as ‘temporary’, the BoE will naturally be concerned about making the same mistake twice, especially as December’s inflation print was a little higher than expected.
“While the central bank had expected a rise in inflation from rises in regulated prices, energy costs and a pass-through from higher employment taxes, the rise in food prices has remained sticky. But there are upcoming developments which should bring down the headline inflation rate, including lower utility inflation, delays to fuel duty increases and a rail fare freeze.
“While the MPC will have welcomed private sector wage growth continuing to slow to 3.6% compared to 6% at the start of 2025, there are concerns about a prolonged deterioration of the labour market. The redundancy rate, which tracks the share of people reporting they were made redundant in the past three months, was 4.9 per thousand employees, up from 3.8 previously.
“Those employment concerns mean that if inflation does start falling in line with expectations in the next print, the BoE will be expected to move as quickly as they can to reduce rates to try to stimulate economic activity.”
Consumer Analysis
What’s happened?
“Today, we saw the Bank of England interest rate stay the same at 3.75%, in line with market expectations.
What does the latest BoE rate mean for your money?
“Inflation – currently at 3.4% – remains a concern for both the Bank of England and for people’s wallets. Everyday goods have continued to increase in price, albeit at a slightly lower pace. That means people’s financial resilience is being challenged, although there are signs from the latest inflation print that the price growth is slowing.
“Holding the base rate at 3.75% will be disappointing news for variable mortgage holders who will have been hoping for a rate cut to reduce their monthly outgoings. As for remortgagers, all is not lost as they’ve recently seen a slight drop in rates. For example, the average fixed rate for a two-year 75% LTV mortgage in December this year was 3.97%, having been 4.06% in November.
“Meanwhile, savers can make the most of this hold in the base rate and continue to get inflation-beating returns on the money they set aside. The main high street banks have been slower to pass on increases in the base rate to customers so it’s important to explore other options – smaller banks, building societies, and fintechs are usually quicker to offer higher rates on savings accounts, including Cash ISAs. Many are currently offering rates well above 4%.
“Against a challenging economic background, people are looking for competitive interest rates for their cash savings with tax-free returns. It’s also paramount that customers consider a range of options to secure better long-term returns for their money, especially if interest rates return to a downward trajectory, like a Stocks & Shares ISA.”
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Susannah Streeter, Chief Investment Strategist, Wealth Club
“The Bank of England has pushed a big red pause button on interest rate cuts as caution remains the name of the game and policymakers assess flickering growth and stubborn inflation. Although the signs are that the price spiral will be dampened down in the coming months, they’ve judged that it’s still too early to move, especially given signs that growth in the economy is showing tentative signs of making a comeback.
“The latest PMI snapshot showed activity accelerating with Budget blues being cast aside. Plus, with headline inflation ramping up at the last count, and wage growth still uncomfortable, it’s not a clement environment for interest rate cuts. Still, it was a closer call than expected, and it puts a cut in March still very much in the picture. The labour market is showing weakness, Budget changes are set to bring down energy and transport costs and a wave of cheaper Chinese goods are heading this way. So, more policymakers could well be swayed to vote for lower borrowing costs next month.
“But these are volatile times, with the overall outlook in a state of flux, given ongoing geopolitical tensions, erratic US trade policy, and a tech sell off roiling markets. So, the Bank’s decision makers will still want more clarity on what could be ahead, before tinkering with borrowing costs again.”
Guy Gittins, CEO, Foxtons
“Today’s decision to hold the base rate is unlikely to disrupt a property market that has, once again, started the year positively.
With further rate cuts anticipated in 2026, buyer confidence remains high and we’ve seen the expected seasonal uplift in enquiries, viewings booked and offers being made. We anticipate this positive momentum from buyers and sellers will be sustained, creating a strong platform for the year ahead.”
Richard Merrett, Managing Director, Alexander Hall
“Today’s decision to hold the base rate is unlikely to dampen the market momentum that has been building in recent months, and we’ve already seen a noticeable increase in activity following the cut in December, with buyers hitting the ground running in the new year with a renewed sense of confidence.
This confidence has been mirrored by lenders, who continue to offer greater product choice and more flexible terms, particularly when it comes to loan-to-income multiples. As a result, the average homebuyer is now around £1,000 better off each year when it comes to the cost of their mortgage repayments when compared to just 12 months ago.”
Jonathan Samuels, CEO, Octane Capital
“No news is good news in the grand scheme of things, and today’s decision to hold the base rate provides welcome consistency for both lenders and borrowers, particularly given the fact that inflation climbed in December and remains higher than the Bank of England’s two percent target.
With this considered, a static base rate should provide lenders with the confidence to maintain competitive product ranges and pricing, whilst it also allows borrowers to plan with greater certainty. This will create a supportive environment for buyers and investors alike, helping to sustain activity and confidence across the property market..”
Damien Jefferies, Founder, Jefferies London
“The decision to hold the base rate bolsters stability for international and high-net-worth buyers who are actively assessing opportunities in the UK market, with consistency in monetary policy helping to reinforce confidence and predictability when allocating capital across global property markets.
“With borrowing costs remaining broadly stable, the UK continues to present an attractive proposition and this should support continued cross-border investment and enables buyers to plan acquisitions with greater certainty over the months ahead.”
Marc von Grundherr, Director, Benham and Reeves
“The housing market has continued to demonstrate strong levels of activity so far this year, with the December rate cut helping to put homebuyers firmly on the front foot heading into 2026.
“As a result, enquiry levels, viewings, and transaction volumes have remained robust, underpinned by improving confidence and more stable economic conditions, with today’s decision to hold the base rate unlikely to rock the boat.”
Verona Frankish, CEO, Yopa
“While today’s decision to hold interest rates may have disappointed those homebuyers hoping for further reductions to mortgage rates, it is unlikely to dampen market activity, with many buyers remaining keen to progress their plans this year having gained confidence from stabilising interest rates over the course of the last year.”
Paul Noble, CEO, Chetwood Bank
“I don’t think anyone believes today’s result means rates will stay at their current level for long. The MPC might be getting mixed signals from the economy, but it feels like there’s a general sense that it’s only a matter of time before we see another cut.
“That expectation is already feeding into pricing, particularly at the short end of the market. Whilst we’re seeing savings rates gently ease back as the market anticipates lower bank rates later this year, longer-term borrowing costs, including mortgage pricing, remain influenced by where longer-dated swap rates settle. These have been more resilient.
“Falling swap rates will mean we almost certainly see rates go down across the entire savings space in the coming weeks, which means smart savers will look to lock down the best fixed-rate deals while they’re still high. Across the board, savers need to be alert and make sure they’re making the most of their money, particularly any funds left in low- or no-interest accounts when they could be making more of a difference.”
