UK Interest Rates Remain at 3.75 Percent, Central Bank Watches Energy Prices

JAKARTA - The Bank of England kept its policy rate at 3.75 percent on Thursday. Inflation is indeed starting to fall, but the Bank of England is not yet calm because energy prices are still at risk of pushing inflation up again.

Anadolu Agency, quoted on Thursday, July 30, reported that the decision was made by the Bank of England's Monetary Policy Committee by a vote of 6 to 3.

The majority of members voted to hold the interest rate. However, three other members supported a 25 basis point increase to 4 percent.

A basis point is a small unit for reading interest rate changes. A 25 basis point increase is equal to 0.25 percent.

The Bank of England said annual consumer inflation had fallen to 2.6 percent since the previous meeting. However, inflation is expected to rise again by the end of this year.

Pressure comes from high crude oil and processed energy product prices. If energy costs go further into the economy, prices for goods and services can be pushed.

The Bank of England said energy prices were still volatile and above pre-conflict levels. Developments in the Middle East also made the outlook for British growth and inflation difficult to read.

Even so, the committee sees little evidence that higher energy costs have triggered broader wage and price increases.

The latest data also still shows basic disinflation. Disinflation is a condition when the rate of price increases slows down, even though the price of goods and services does not necessarily go down.

However, the Bank of England remains cautious. The committee said the risk of inflation is now more to the upside than the projection in the July Monetary Policy Report.

The Bank of England has confirmed it is ready to act if necessary to return inflation sustainably to its 2 percent target.

UK annual inflation fell to 2.6 percent in June 2026 from 2.8 percent in May. The decline was larger than market expectations of inflation falling to 2.7 percent.

June's figures were also Britain's lowest inflation since March 2025.

The decline in inflation was mainly supported by slowing transport inflation. Inflation in the sector fell to 5.7 percent in June, from 6.8 percent in May.

The largest contribution to the decline came from vehicle fuels, especially diesel.

Anadolu noted that the Bank of England's next interest rate decision is scheduled for September 17.