Bank of England’s latest decision on base rate

Bank of England holds base rate as energy-driven inflation risks grow

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8–1 to maintain the base rate at 3.75% at its April meeting⁽¹⁾. One member voted to increase Bank Rate by 0.25 percentage points to 4%.

In its latest Monetary Policy Summary, the MPC highlighted that the conflict in the Middle East has created significant uncertainty around global energy prices, with implications for the UK inflation outlook.

CPI inflation has increased to 3.3% and is expected to rise further later this year as higher energy costs feed through to household bills and business costs. While monetary policy cannot influence global energy prices directly, the MPC said it would act to ensure inflation returns sustainably to its 2% target over the medium term.

The Committee emphasised the risk of second-round effects, where higher energy prices begin to influence wage and price-setting behaviour more broadly. However, it also noted that a loosening labour market and weakening economic activity could act to contain inflationary pressures.

Financial conditions have tightened since the onset of the conflict, which the MPC expects will help to reduce inflation over time. Taking these factors together, the Committee judged it appropriate to hold Bank Rate at this meeting while continuing to monitor how the situation evolves.

The accompanying Monetary Policy Report sets out three potential scenarios for the UK economy, reflecting different paths for energy prices and the extent of second-round effects. The MPC reiterated that its policy response will remain state-dependent, with a more persistent or pronounced inflation shock likely to require a more restrictive stance.

In its discussions, the Committee noted that direct impacts of the energy shock are already visible, particularly in fuel prices, and that indirect effects through higher production costs, including food, are likely to be significant. Members also highlighted that second-round effects could emerge more quickly through pricing decisions than through wage-setting, although the strength of these effects will depend on how long energy prices remain elevated.

Dr David Crosthwaite, chief economist at BCIS, said: ‘While the Bank of England has held interest rates, its latest commentary points to a renewed source of inflationary pressure coming from energy markets rather than domestic demand.

‘For construction, this matters because energy costs feed through multiple parts of the supply chain, from the manufacture of key materials to transport and on-site activity. The risk is not just a short-term increase in costs, but the potential for wider second-round effects, as suppliers adjust prices and wage expectations respond to higher living costs.

‘The Bank appears to be waiting for firmer data before acting, which is consistent with the approach taken by many forecasters. However, the latest update suggests increasing uncertainty around the inflation outlook, particularly if energy-driven pressures persist. In that context, the path of interest rates remains unclear and will depend on how sustained these pressures prove to be.

‘The key uncertainty is duration. A temporary rise in energy prices may have a limited impact on tender pricing, but if pressures persist, we are more likely to see this reflected in contractors’ pricing strategies and greater volatility in tender price indices.

‘Holding Bank Rate provides some stability on the financing side, but it does not remove the underlying cost pressures. For clients and project teams, this reinforces the need to keep cost plans under close review and to remain alert to shifting risks in the months ahead.’

The MPC said it will continue to monitor developments in the Middle East and assess how the shock propagates through the economy, drawing on a range of data, surveys and market intelligence.

Looking ahead, the Committee noted that the outlook for inflation remains uncertain and will depend on the scale and duration of the energy price shock, as well as how businesses and households respond.

The MPC’s next vote will be announced on 18 June 2026.

To keep up to date with the latest industry news and insights from BCIS register for our newsletter here.

^{(1) Bank of England – Bank Rate maintained at 3.75% – April 2026 Monetary Policy Summary and Minutes – here}