Bank of England set to hold interest rates at 3.75% on 30 July

The Bank of England is poised to keep the base interest rate at 3.75% when its Monetary Policy Committee meets on 30 July. Economists at Oxford Economics and Nomura told *The Standard* they expect a seven-to-two vote in favour of holding the rate, continuing the current policy despite recent geopolitical tensions.

The decision follows a drop in UK inflation to 2.6% in June, the lowest level in 15 months. The Office for National Statistics reported the decline was driven by slower increases in food and fuel prices. The figure remains above the Bank’s 2% target but marks a significant reduction from earlier in the year.

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Inflation risks remain

While the June inflation data provided some relief, the Bank of England has warned that inflation is likely to rise again later this year. It previously forecast inflation would climb to 3.25% as higher energy costs feed into household bills from July. *The Standard* reported that the Bank’s economic forecasts, due to be published alongside the rate decision, will reflect these concerns.

Recent attacks in the Red Sea and threats from US president Donald Trump have added to uncertainty. Oil prices surged above $100 per barrel for the first time since May, raising fears of supply disruptions. Prices fluctuated sharply this week, falling after a temporary pause in hostilities before rising again on 24 July.

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“If they remain close to 100 dollars per barrel over the summer, a September rate hike would move firmly onto the table, with another in the winter likely.”

Thomas Pugh, chief economist at RSM UK

Thomas Pugh, chief economist at RSM UK, told *The Standard* that oil prices will largely determine the path of interest rates over the next year. He said if prices stay near $100 per barrel, the Bank may consider a rate hike in September, with further increases possible later in the year. However, if tensions ease and prices fall, the Bank could hold rates steady before cutting them three times in 2027.

Economic growth concerns

The Bank’s decision comes as the UK economy shows signs of stagnation. GDP grew by just 0.1% in May, following a rebound earlier in the year. *The Standard* reported that rate-setters may be cautious about raising interest rates further, given the weak growth outlook.

Governor Andrew Bailey is expected to address how the renewed conflict in the Middle East has influenced the Bank’s inflation forecasts. He will also outline the committee’s approach to future rate decisions, balancing the risks of persistent inflation against the need to support economic growth.

The next interest rate decision will be announced at midday on 30 July, alongside updated economic projections. It is unclear whether the Bank will signal a shift in policy later this year, depending on how inflation and oil prices develop.