Bank of England Holds Bank Rate at 3.75% (8-1 Vote) — One MPC Member Dissents for Hike to 4.00% as Iran War Keeps UK Inflation Above 3%

The Bank of England's Monetary Policy Committee voted **8 to 1** on April 30, 2026 to hold the Bank Rate at **3.75%** — the second consecutive hold after six consecutive cuts from 5.25%. One MPC member voted for an immediate +25bp hike to 4.00%, marking the most hawkish dissent since the BOE began its easing cycle in August 2024. **Key data context:** - **UK CPI: 3.3%** in March 2026 (above the 2% target; driven by Iran war energy pass-through) - Q2 2026 CPI forecast: 3.1% average; Q3 2026 forecast: 3.3% — energy-driven re-acceleration expected before falling back in 2027 - UK GDP growth 2026: Downgraded to 0.6–0.9% (IMF: 0.8%; OECD: 0.7%) from prior 1.2–1.3% forecasts - Prediction markets: 45.5% probability of two consecutive negative GDP quarters **Governor Bailey's commentary:** Bailey described the combination of below-target growth and above-target inflation as 'the most difficult combination' for monetary policy. He stated energy prices from the Middle East conflict are 'very uncertain' but likely to have 'a long-lived effect.' In a downside scenario (prolonged Iran war with severe oil supply disruption), Bailey warned BOE rates could need to return to 5.25% and CPI could spike to 6.2%. **Policy rationale:** The BOE explicitly acknowledged that 'monetary policy cannot influence energy prices' — the core driver of current inflation. The Committee is navigating the same stagflation trap as the Fed and ECB: energy-driven inflation prevents cuts, while deteriorating growth prevents hikes (at least until the hawkish dissenter's view prevails). With the Bank Rate at 3.75% and the ECB holding at 2.00%, the BOE sits between the two in the global rate cycle. **Next meeting:** June 18, 2026 — by which time the Iran war's energy price trajectory will be clearer and April 2026 CPI data will be available.