Bank of England holds rate at 3.75%, warns energy costs could force rise

The Bank of England held its base rate at 3.75% on Thursday, warning that war-driven energy costs could force it to raise borrowing costs.

• The Bank's monetary policy committee voted six to three to keep the base rate unchanged at 3.75%.
• Official figures published Wednesday showed UK inflation rose to 3.1% in August from 2.9% in July, with fuel and airfares the largest driver.
• Governor Andrew Bailey said the longer energy-driven volatility persists, the more likely the Bank will need to raise rates to return inflation to its 2% target.
• The Bank announced plans to sell £146bn of UK government bonds to the Treasury, pausing active gilt sales until an agreement is reached.
• The Bank of England projected that UK inflation will exceed 4% by 2027, according to its latest forecast.
• The Bank raised its Q4 2026 inflation forecast to about 3.75%, projecting inflation to exceed 4% in Q1 2027, driven almost entirely by higher oil and gas prices.
• The Bank proposed selling its £488bn gilt stockpile directly to the Treasury rather than to private buyers, returning gilts to a single public-sector supplier.
• The Treasury's Debt Management Office would issue new bonds under the restructured quantitative tightening programme.
• The Bank will pause gilt sales for six months and end long-dated bond sales under a new multi-year plan to reduce most of its portfolio by 2034.
• Bailey denied the change was a response to market deterioration, saying work on the plan began before the US-Iran war started in February.