Monetary Policy
6 articles tagged with this topic.
Bank of England Monetary Policy Report – February 2026
The MPC voted 5–4 to hold Bank Rate at 3.75%, with four members preferring a 0.25pp cut, as CPI inflation (3.4% in December) is projected to fall close to the 2% target by Q2 2026, largely due to lower energy bills helped by measures in Budget 2025. The Bank signals further cuts are likely but will be a closer call, given easing wage growth and a loosening labour market alongside lingering services inflation and administered price effects. Ofgem’s price cap is expected to drop in April to £1,616 from £1,758, and private-sector pay growth has moderated toward c.3–4%.
Bank Rate held at 3.75% as BoE monitors energy-driven inflation
On 19 March 2026, the Bank of England’s MPC kept Bank Rate at 3.75% after six cuts since August 2024. It cited the war in the Middle East raising global energy prices, which will lift UK inflation above earlier expectations in the short term; current CPI inflation is about 3% versus a 2% target. The MPC said it will monitor conditions closely and act to keep inflation on track in the medium term.
UK GDP: Q4 2025 growth 0.1%; Reeves predicts stronger 2026
ONS data show UK GDP rose just 0.1% in Q4 2025 and 1.3% across 2025, undershooting forecasts. Services saw no growth, production rose 1.2%, and construction fell 2.1% (worst in four years), with weak consumer spending and falling business investment leaving little momentum into 2026. The Bank of England signalled possible rate cuts in the next meetings, while Chancellor Rachel Reeves said growth should be stronger in 2026.
UK unemployment rate steady at 5.2% (3 months to Jan 2026), highest since early 2021
The UK unemployment rate held at 5.2% in the three months to January 2026, the highest since early 2021 and a touch below expectations. Unemployment rose by 37,000 on the quarter to 1.869 million, while employment increased by 84,000 to 34.31 million, the employment rate ticked up to 75.1%, and economic inactivity fell to 20.7% (down 99,000 to 8.999 million). Wage indicators show easing momentum (ex‑bonus pay growth at 3.8% y/y) and vacancies edged down to 721,000.
UK food inflation heading towards 10% due to Iran war, industry says
The Food and Drink Federation (FDF), representing around 12,000 UK manufacturers, now forecasts UK food and non-alcoholic drink inflation of roughly 9–10% by December 2026, up from a pre‑war projection of 3.2%, due to Iran war‑related disruptions to energy, fertiliser and shipping via the Strait of Hormuz. The industry is highly energy‑intensive; as hedges roll off, larger firms expect higher costs and smaller producers buying energy on spot markets are already seeing spikes. Early impacts are visible at fuel pumps, while grocery inflation stood at 4.3% in the four weeks to March 22, according to Worldpanel by Numerator.
UK food inflation seen nearing 10% by December 2026 due to Iran war disruption, FDF warns
Britain’s Food and Drink Federation now expects food and non‑alcoholic drink inflation to reach around 9–10% by December 2026, up sharply from a prior 3.2% forecast, because the Iran war has disrupted the Strait of Hormuz and pushed up oil, gas and fertiliser costs. The energy‑intensive food industry faces higher input prices; larger firms with hedges may see delayed impacts while many SMEs on spot markets face immediate spikes, with farmers warning of near‑term rises for greenhouse‑grown produce. UK grocery inflation ran at 4.3% in the four weeks to March 22, while higher fuel prices show the first clear impact on households.