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Bank of England

Why the Bank of England’s Rate Hold Can Be an Active Response to Inflation

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The Bank of England’s Monetary Policy Committee (MPC) voted 6–3 to keep Bank Rate at 3.75% at its September 2026 meeting, according to Deputy Governor Dave Ramsden. He argued that holding is not the absence of a policy decision: when the inflation outlook is uncertain, keeping rates unchanged can itself be an active response to the risks.

What Ramsden meant by an “active” hold

In a speech published in September 2026, Ramsden said: “For my part, Bank Rate being the ‘active’ tool doesn’t always mean it has to change. Indeed, a decision to hold can be an active response to the risks to the inflation outlook.” The phrase is Ramsden’s explanation of his own vote with the majority; it should not be mistaken for a formal collective MPC slogan. Read Ramsden’s September speech.

A rate hold leaves the policy rate at its existing level, but the MPC still weighs whether that level is appropriate given the likely path of inflation. If it judges that existing restraint is helping contain inflation risks and that more evidence is needed, waiting can be a deliberate choice rather than inaction.

What is established about September’s decision

Ramsden reported that the September MPC vote was 6–3 to maintain Bank Rate at 3.75%. He voted with the majority. His speech establishes the outcome and his own explanation, but it does not provide a complete account of the arguments made by every member in September.

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Ramsden also described how his view had changed. Before the Middle East conflict, he had voted in February for a cut to 3.5%. He said he would have expected at least two cuts by the time of his September speech if evidence of disinflation had remained on track. That was his personal counterfactual assessment, not an MPC forecast or a commitment to a future rate path.

Why the July minutes help explain the trade-off

The available detailed explanation comes from the MPC’s July meeting, not September. In July, the Committee also voted 6–3 to hold Bank Rate at 3.75%; the three dissenters preferred a 0.25-percentage-point increase to 4%. Those minutes illustrate the competing risks facing policymakers, but they should not be read as a full record of September’s reasoning. See the July 2026 summary and minutes.

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Why some members supported holding

The July hold group considered the existing Bank Rate, alongside the tightening in financial conditions since the Middle East conflict began, sufficient insurance against energy-related inflation risks while the Committee gathered more evidence. Holding left the option open to change the rate later if the evidence warranted it. Members also recognised that additional restraint could be needed if material second-round effects emerged.

Why higher rates remained an option

Higher energy prices can feed into other prices and wage-setting. If those effects persist, inflation could become more entrenched, strengthening the case for a rate increase. In July, three members judged that a 0.25-point rise to 4% was preferable. The minutes record the split but do not imply that the same arguments or balance of views applied in September.

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Why policymakers were weighing both risks

The July summary said energy prices remained volatile and above their pre-conflict level, making the UK economic impact uncertain. It reported that CPI inflation had fallen to 2.6% since the previous meeting, while anticipating a rise later in 2026 as higher energy prices passed through. The Committee saw a greater risk of second-round effects the longer energy prices stayed high, but noted little evidence of those effects so far and continued signs of underlying disinflation. These are July assessments, not September inflation readings.

What the Bank can—and cannot—do about energy prices

Monetary policy cannot directly change global energy prices. The MPC’s task is to set policy so that the economy’s adjustment to shocks supports the 2% inflation target sustainably. In practice, it watches how an energy shock passes through to UK wages, prices and inflation expectations, rather than treating Bank Rate as a tool for setting the price of energy. See the July 2026 Monetary Policy Report.

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What a hold does not promise

Keeping Bank Rate at 3.75% does not commit the MPC to hold it at the next meeting, nor does it rule out a cut or an increase. The July policy statement said future decisions would depend on evolving evidence, the inflation outlook and risks—including whether higher energy prices generated strong inflationary pressures as they passed through the economy. A hold can therefore preserve room to respond in either direction as the outlook becomes clearer.

The distinction matters: a hold is a decision about the appropriate setting now, not a forecast that conditions will stay the same. Ramsden’s “active response” description captures that logic for his September vote; the specific September arguments of the full Committee are not established by the July minutes or his speech alone.

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