Decision
Actual: held at 3.75%
Vote: 6-3 in favor of holding
Three members (Greene, Mann, Pill) voted for a hike to 4%
UK CPI
Actual: 3.1% in August
Overshoot of 1.1pt versus target, of which 0.7pt directly attributed to energy prices
Q4 2026 projection: around 3¾% (versus 3.2% anticipated in July)
Q1 2027 projection: slightly above 4%
Services inflation
Actual: 3.4% in August, unchanged from July
Down from 4.5% in March
Private sector wage growth
Actual: 2.9% over 3 months to July
Underlying estimate: around 3.5% (HMRC indicators and pay settlements)
Down from 3.3% at the start of the year
Q2 2026 GDP
Actual: +0.4%, 0.1pt above July expectations
Monthly July GDP: +0.4%, also above expectations
Q3 projection: +0.4% (versus +0.1% anticipated in July)
Unemployment
Actual: 4.9% over 3 months to July, unchanged since April
Operational error noted in LFS sample size in May-June
The real signal, the BoE explicitly acknowledges a worsening inflation trajectory
The committee judges inflation risks "tilted to the upside, more so than at the time of the July Report"
A mechanical update to internal projections suggests CPI could reach slightly over 4% in early 2027, almost entirely accounted for by oil and gas prices
The committee now places more weight on a scenario of persistently elevated energy prices, closer to July's adverse scenario than its central projection
Energy backdrop, precise figures
Brent: +36% since July, at $106/barrel as of September 14
UK wholesale gas: +78% since July, at 207 pence/therm
Crack spreads (refining margins) remain well above pre-conflict levels
Ofgem's October-December price cap raised to £1,723, higher than anticipated in July, with a further substantial rise expected in Q1 2027
Reassuring signal, no second-round effects yet
Little evidence of indirect effects on food prices, food inflation now expected around 4% by end-2026 versus 6-7% anticipated in April
Bank Agents note firms are absorbing part of the shock via margins and hedging, but these are temporary buffers
The committee explicitly acknowledges these effects may have been "delayed rather than diminished"
The dissent, three well-argued votes for a hike
Mann, Greene and Pill share the view that resilience in activity and employment means slack has likely already peaked, weakening the main argument for holding
Pill stresses the value of signaling, acting now would be less costly than having to reverse entrenched second-round effects later
Major complementary measure, QT wind-down scheduled
Reducing the government bond stock to zero, unanimous vote
Multi-year plan through 2034, average pace of £46 billion per year (£20 billion in sales plus maturing bonds)
£120 billion set aside to back banknote issuance
A structural decision independent of the rate cycle, clarifying the BoE's balance sheet trajectory for the next decade
Implications
GBP: mixed signal but leaning slightly hawkish medium-term, the hold at 3.75% matches expectations (91% odds of a hold per pricing documented earlier in this series), but the sharply upward-revised inflation trajectory and the three-vote dissent suggest a November or December hike becomes more likely if oil stays elevated
Consistent with the already-analyzed UK CPI (acceleration to 3.1%, fuel at its highest since 2022), this decision confirms the BoE can no longer ignore energy pressure
GBP/USD: with the Fed having delivered a dot plot actually less hawkish than the market expected (cf. prior analysis), the bias gap could narrow slightly if the BoE leans toward a hike later this year against a Fed capping out in 2027
This QT decision is a separate technical factor, potentially a source of volatility in long gilts independent of the rate cycle
Point of caution
The decisive factor remains, as documented throughout this series, how the Middle East conflict and oil prices evolve, the BoE explicitly acknowledges this as "the dominant source of uncertainty"
A fresh escalation could tip several of the six hold votes toward the hike camp as soon as the next meeting (November 5), particularly Bailey and Lombardelli who both explicitly flag the possibility of tightening if the conflict persists
Carefully distinguish the three-vote dissent (a strong signal of internal tension) from the vote outcome itself (hold confirmed), the real story here is the trajectory, not the headline number