UK Monetary Policy Report - February 2026

At its meeting ending on 4 February 2026, the Monetary Policy Committee voted by a majority of 5–4 to maintain Bank Rate at 3.75%. Four members voted to reduce Bank Rate by 0.25 percentage points, to 3.5%. Although above the 2% target currently, CPI inflation is expected to fall back to around the target from April, owing to developments in energy prices including from Budget 2025. Reflecting the impact of monetary policy, and consistent with evidence of subdued economic growth and building slack in the labour market, pay growth and services price inflation have generally continued to ease. The risk from greater inflation persistence has continued to become less pronounced, while some risks to inflation from weaker demand and a loosening labour market remain. Monetary policy is being set to ensure that CPI inflation not only reaches 2% but remains sustainably at that level in the medium term, which involves balancing the risks around achieving this. The restrictiveness of policy has fallen as Bank Rate has been reduced by 150 basis points since August 2024. On the basis of the current evidence, Bank Rate is likely to be reduced further. Judgements around further policy easing will become a closer call. The extent an BOE: DHINGRA, TAYLOR, RAMSDEN, BREEDEN WANTED CUT TO 3.5% BOE SAYS INTEREST RATES 'LIKELY TO BE REDUCED FURTHER' BOE'S BAILEY SAYS "ALL GOING WELL, THERE SHOULD BE SCOPE FOR SOME FURTHER REDUCTION IN BANK RATE THIS YEAR" ... Bank of England maintains interest rate at 3.75% with inflation still above target The Bank of England kept its main interest rate unchanged at 3.75% on Thursday with U.K. inflation remaining above target and economic growth is showing signs of picking up. The decision was widely anticipated in financial markets. The central bank, which sets interest rates for the whole of the U.K., has been steadily reducing interest rates over the past 18 months, more often than not every three months. It last cut its key rate in December by a quarter of a percentage point and indicated that further reductions are likely this year. Since then, a series of economic indicators have shown the British economy has made a stronger than anticipated start to the year, which has the potential to put upward pressure on inflation. Inflation, though trending downward over the past year or so, remains above the Bank of England’s 2% target, at 3.4%. THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

BANK OF ENGLAND'S BAILEY SAYS DISINFLATION IS ON TRACK, AHEAD OF SCHEDULE EXPECTED IN NOV BANK OF ENGLAND'S BAILEY SAYS WE ARE NOT CURRENTLY FACING A SITUATION IN WHICH MONETARY POLICY IS BEING HIT BY BIG NEW SHOCKS ... BANK OF ENGLAND'S BAILEY SAYS NEED TO ENSURE THAT INFLATION FALLS ALL THE WAY BACK TO 2% AND STAYS THERE ... BoE’s Gov Bailey: Upside Risks To Inflation Have Diminished - 'Lower Inflation Should Feed Into Expectations - We Expect Pay Growth Around 3.2% By End Of Year - Underlying Employment Flat Over Past Year

The Governing Council today decided to keep the three key ECB interest rates unchanged. Its updated assessment reconfirms that inflation should stabilise at its 2% target in the medium term. The economy remains resilient in a challenging global environment. Low unemployment, solid private sector balance sheets, the gradual rollout of public spending on defence and infrastructure and the supportive effects of the past interest rate cuts are underpinning growth. At the same time, the outlook is still uncertain, owing particularly to ongoing global trade policy uncertainty and geopolitical tensions. The Governing Council today decided to keep the three key ECB interest rates unchanged. Its updated assessment reconfirms that inflation should stabilise at its 2% target in the medium term. The economy remains resilient in a challenging global environment. Low unemployment, solid private sector balance sheets, the gradual rollout of public spending on defence and infrastructure and the supportive effects of the past interest rate cuts are underpinning growth. At the same time, the outlook is still uncertain, owing particularly to ongoing global trade policy uncertainty and geopolitical tensions. TRADERS KEEP ECB RATE BETS STEADY, PRICE 5BPS OF CUTS IN 2026 Just in | ECB Reports Gradual Decline of APP and PEPP Portfolios as Reinvestment of Maturing Securities Ceases. ECB holds interest rates at 2% after eurozone inflation drops in January The European Central Bank (ECB) has left interest rates on hold at 2%, as widely expected, after inflation in the eurozone came in at 1.7% in the year to January. This means rates across the eurozone have been paused for a fifth consecutive time, since June last year, since inflation slipped back to the bloc’s target. Economists still expect no change in the coming months from the ECB, which has predicted that inflation will average 1.9% in 2026 after hovering at 2.1% last year. However, Andrzej Szczepaniak, an analyst at Nomura, said he expects its next move to be an increase rather than a cut, although he expects rates to “remain on hold for the foreseeable future”. He forecasts unemployment in the eurozone to fall further, “adding to wage growth and inflationary pressures”. He predicted at least two quarter point increases in rates in 2028 to “bring inflation back to target”.