Bank of England Holds Bank Rate at 3.75% as Chief Economist Pill Dissents in Favour of 25bp Hike

The Bank of England held Bank Rate at 3.75% at its April Monetary Policy Committee meeting, with policymakers voting 8-1 to keep the benchmark unchanged. Chief Economist Huw Pill was the sole dissenter, voting to raise Bank Rate by 25 basis points to 4.00%.

The Committee also flagged a risk of material second-round effects in price and wage-setting from the energy shock caused by the conflict in the Middle East, which policy would need to lean against. On 29 April, the stock of UK government bonds held for monetary policy purposes was £525 billion.

INFLATION BACK ABOVE TARGET

The decision to hold came against a backdrop of CPI inflation having increased to 3.3% ahead of the meeting, well above the Bank's 2% target. Officials attributed the recent rise mainly to higher household motor fuel prices, with further upward pressure expected from utility bills and food prices. The minutes said the Committee discussed the appropriate balance between returning inflation to target more slowly and risking further weakness in economic activity.

The MPC's minutes made clear that policymakers were watching closely for signs that the energy-driven inflation impulse could feed through into wages and pricing behaviour more broadly.

Bank staff expected inflation to decline to 3.1% on average in the second quarter of 2026 before rising back to 3.3% in the third quarter, and to rise somewhat further in the fourth quarter. The minutes noted that wage growth had been easing towards target-consistent rates and that private-sector wage settlements for 2026 had been largely completed before the shock occurred.

PILL'S HAWKISH DISSENT

Explaining his vote, Mr Pill said that "a prompt but modest hike in Bank Rate will help mitigate upside risks to price stability stemming from a re-emergence of intrinsic inflation persistence".

The remaining eight members voted to hold Bank Rate, with the minutes noting that most members recognised that the tightening in financial conditions since the conflict began would help to reduce inflation over time.

The Committee said it would continue to monitor closely the situation in the Middle East and how its impact propagates through the economy, and that it stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term.