The Bank of England's Monetary Policy Committee meets on 30 April 2026 to deliver its most consequential interest rate decision in years. With energy prices surging on the back of the Iran war, inflation climbing, and the economy barely growing, the MPC must choose between raising Bank Rate to fight rising prices and holding steady to avoid tipping a fragile economy into outright recession. The evidence, on balance, points firmly toward holding rates at 3.75 per cent and resisting the growing pressure to hike.

Key figures at a glance: Bank Rate: 3.75% · CPI inflation (Feb 2026): 3.0% · BoE projected CPI (Mar 2026): 3.5% · Unemployment: 5.2% · GDP growth (Q4 2025): 0.1% · Youth unemployment: 16.0%

## The State of the Economy The starting conditions matter enormously for this decision, and they reveal an economy that was struggling well before the first missiles struck. UK GDP grew by just 0.1 per cent in the final quarter of 2025, according to the Office for National Statistics, capping a year of sluggish expansion at 1.3 per cent overall, below the OBR's forecast of 1.5 per cent.[^1] Bank of England staff estimated that underlying quarterly growth in Q1 2026 was running at roughly 0.1 per cent, with monthly GDP flat in January.[^2] Private forecasters have since slashed their outlooks further. Pantheon Macroeconomics now projects just 0.6 per cent growth for 2026, whilst KPMG and Barclays have both cut their estimates to 0.7 per cent.[^3] The OECD's revised interim outlook was the most pessimistic of all, pencilling in growth of just 0.5 per cent alongside a 1.5 percentage point upward revision to its UK inflation forecast, the steepest revision for any major economy.[^4]

Data note: Q3 and Q4 growth of 0.1% are confirmed by the ONS. Full year 2025 growth was 1.3%, with Q1 and Q2 higher than the second half. The Q1 and Q2 figures shown are estimates consistent with this profile.

The labour market reinforces this picture of underlying weakness. Unemployment reached 5.2 per cent in the three months to January 2026, with 1.87 million people out of work, an increase of 323,000 from the previous year and near its highest rate since 2021.[^5] Youth unemployment is especially acute, with 732,000 people aged 16 to 24 out of work, representing a rate of 16 per cent and close to its highest level since early 2015.[^5] Job vacancies have fallen to 721,000, which is now below pre pandemic levels, and payrolled employee numbers declined by 96,000 over the year to January according to HMRC data.[^6] These are not the conditions of an overheating economy that warrants tighter policy. They are the conditions of an economy operating well below capacity. --- ## The Inflation Picture Inflation stood at 3.0 per cent in February 2026, unchanged from January, in what the ONS confirmed was the last monthly reading before the Iran war's effects began filtering through to consumer prices.[^7] Core inflation, which strips out volatile items like food and energy, edged up slightly to 3.2 per cent, while services inflation, the measure the Bank watches most closely as a gauge of domestic price pressure, ticked down to 4.3 per cent from 4.4 per cent.[^7] The February figure, however, is now a relic of a pre war world. The Bank of England's own March minutes stated that, based on energy prices as of 16 March, CPI inflation was expected to be close to 3.5 per cent in March, roughly half a percentage point higher than projected in the February Monetary Policy Report.[^2] Looking further ahead, the Bank estimated that inflation could rise to as much as 3.5 per cent in the third quarter through the combination of direct energy costs and indirect pass through from businesses facing higher input costs.[^2] The OECD projects UK inflation averaging 4 per cent over the year.[^4] Private forecasters including ING and RSM UK have warned that inflation could reach as high as 5 per cent if energy prices remain elevated.[^8]

Data note: CPI figures for January to March, May to July, September, and November 2025 through to February 2026 are verified ONS releases. April, August, and October 2025 are estimates based on the confirmed trajectory and may differ slightly from final published ONS figures.

--- ## The Case for Hiking and Why It Falls Short The argument for raising rates is straightforward on the surface. Inflation is above target and heading higher. The UK entered the Iran war energy shock with consumer prices already running at 3 per cent, well above the Bank's 2 per cent goal. Household inflation expectations over the next five years stood at 3.7 per cent according to a Bank of England and Ipsos survey conducted before the conflict began.[^2] Markets are pricing in at least two rate increases this year, which would take the Bank Rate to 4.25 per cent, and JPMorgan's chief UK economist, Allan Monks, has predicted at least two hikes, arguing that if the MPC's revised inflation forecasts begin to be validated by April, there is no clear reason to delay further.[^9] > "There is no immediate cause for the Bank of England to be slamming on the brakes with higher interest rates." Andy Haldane, former Chief Economist of the Bank of England.[^10] Huw Pill, the Bank's chief economist, has reinforced the hawkish case from within the MPC. In his statement accompanying the March decision, he argued that structural changes in wage and price setting behaviour over the past decade have made inflationary impulses more persistent than they were historically, citing upward revisions in the Agents' pay survey with settlements now expected at 3.6 per cent for 2026.[^2] The National Institute of Economic and Social Research has modelled a scenario in which sustained energy price increases push Bank Rate to 4.5 per cent.[^9] These are serious arguments. However, they rest on assumptions that the latest data does not support. --- ## The Stronger Case for Holding The most important piece of evidence in favour of holding rates comes from the Bank of England's own survey of over 2,000 chief financial officers, carried out in the two weeks to 20 March. While one year ahead inflation expectations among businesses rose, wage growth expectations actually fell to 3.4 per cent, the weakest reading since 2022 and broadly consistent with the Bank's inflation target.[^2] Private sector regular average weekly earnings growth had already slowed to 3.3 per cent in the three months to January, coming in below the February Report forecast.[^2]

Data note: The 2026 figures (price growth 3.7%, wage growth 3.4%) are verified from the BoE Decision Maker Panel survey to 20 March 2026. The 2022 to 2025 data points are approximate annual averages illustrating the downward trend documented by the Bank of England. Readers should consult the full DMP dataset for precise historical quarterly figures.

Employment growth expectations among firms have turned negative, and corporate sales growth projections are far weaker than they were when oil last breached $100 per barrel during the 2022 crisis.[^2] This is the crucial distinction from the 2021 to 2022 episode, when a white hot labour market with excessive vacancies chasing scarce workers provided the transmission mechanism for energy costs to embed themselves in wages. That mechanism is absent today. The labour market is loosening, firms are cutting headcount rather than bidding up wages, and business uncertainty has risen more sharply than during the initial Ukraine shock.[^2]

Second round effects: In monetary policy, second round effects refer to the risk that an initial price shock, such as rising energy costs, becomes embedded in the broader economy through higher wage demands and further price increases, creating a self reinforcing inflationary spiral.

Monetary policy cannot do anything about the price of oil or the closure of the Strait of Hormuz. As the MPC itself stated in its March minutes, monetary policy cannot reverse a supply shock, and its resolution depends on action taken at its source to restore the safe passage of shipping.[^2] What the Bank can influence is whether the economy has enough demand to sustain a self reinforcing cycle of rising wages and prices. The evidence increasingly suggests that it does not. Deputy Governor Sarah Breeden reinforced this assessment at a London event in late March, stating that the UK faces a lower risk of second round effects from the Iran conflict than it did in 2022.[^11] Governor Andrew Bailey himself has signalled patience, referencing the precedent of former governor Mervyn King in 2011, who held rates steady through a commodity driven inflation surge that pushed CPI above 5 per cent, on the grounds that the Bank's mandate permitted temporary deviations from target to avoid unnecessary economic harm.[^2] --- ## What the Market Expects A Reuters poll of 50 economists published in late March found that 90 per cent expected the Bank to hold at 3.75 per cent on 30 April, with only five forecasting a 25 basis point increase.[^9] Vanguard's April 2026 UK economic outlook concurred, projecting Bank Rate to remain at 3.75 per cent throughout 2026 under a wait and see strategy.[^12]

Forecaster	April 30 Call	Year End Rate
Reuters consensus (90%)	Hold at 3.75%	3.75% to 4.25%
JPMorgan (Allan Monks)	Hold, hike likely by June	4.25%
Vanguard	Hold at 3.75%	3.75%
NIESR (stress scenario)	Hold at 3.75%	Up to 4.50%
Andy Haldane (ex BoE)	Hold at 3.75%	Lower, not higher

> "Monetary policy cannot reverse this shock to supply. Its resolution depends on action taken at its source." Bank of England, Monetary Policy Committee Minutes, March 2026.[^2] --- ## The Risk is Asymmetric The risk profile of the two policy options is not equal. If the Bank hikes and the energy shock proves temporary, as most forecasters project if the conflict is resolved within months, it will have imposed unnecessary contractionary pressure on an already vulnerable economy, amplifying unemployment and suppressing investment.[^13] If it holds and inflation proves more persistent than anticipated, it retains the option to tighten later with significantly better information about the trajectory of energy prices and wage dynamics. The precedent of 2011 is instructive. When commodity prices surged following unrest across the Middle East and North Africa, UK CPI inflation climbed above 5 per cent. The European Central Bank hiked rates in response, a decision it was forced to reverse within months as the eurozone economy buckled. The Bank of England held firm. Inflation eventually subsided as the commodity shock faded, and the economy was spared the additional contractionary force of higher borrowing costs during an already painful period. The conditions today closely resemble that episode. The UK economy is weak. The labour market is loosening. Wage growth is decelerating. The inflation spike is overwhelmingly driven by an external supply shock over which domestic monetary policy has no direct control. The correct response, as in 2011, is to hold rates steady, monitor second round effects closely, and act only if there is clear evidence that higher energy costs are becoming embedded in domestic wages and prices. --- ## The Bottom Line The Bank of England should hold Bank Rate at 3.75 per cent at its April meeting and maintain that stance until the data compels a change. The economy is too weak, the labour market too soft, and the nature of the shock too clearly supply driven for a rate increase to be the appropriate response. The MPC's own surveys show businesses absorbing the energy hit through lower margins and reduced hiring rather than through aggressive price and wage increases. That is precisely the adjustment path the Bank should want to see, and raising rates now would undermine it. The balance of evidence available today, from the ONS labour market data, from the Bank's own business surveys, from the pattern of wage settlements, and from the historical precedent of past energy shocks, all points in the same direction. Hold the line. [^1]: [ONS, GDP First Quarterly Estimate, UK: October to December 2025](https://www.ons.gov.uk/economy/grossdomesticproductgdp), February 2026. [^2]: [Bank of England, Monetary Policy Summary and Minutes, March 2026](https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2026/march-2026). [^3]: [Bloomberg, "UK Growth Forecasts Cut as Iran War Drives Inflation, Rate Hike Bets"](https://www.bloomberg.com/news/articles/2026-03-23/uk-growth-set-to-halve-after-iran-war-hit-economists-warn), 23 March 2026. [^4]: [CNBC, "Iran War Will Spare No Major Economy, Says OECD"](https://www.cnbc.com/2026/03/26/uk-could-be-worse-hit-from-iran-war-of-all-major-economies-oecd.html), 26 March 2026. [^5]: [House of Commons Library, UK Labour Market Statistics](https://commonslibrary.parliament.uk/research-briefings/cbp-9366/), April 2026. [^6]: [ONS, Earnings and Employment from Pay As You Earn Real Time Information](https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment), March 2026. [^7]: [ONS, Consumer Price Inflation, UK: February 2026](https://www.ons.gov.uk/economy/inflationandpriceindices), 25 March 2026. [^8]: [Bloomberg, "Bank of England Hit by 5% Inflation Risk From War in Iran"](https://www.bloomberg.com/news/articles/2026-03-09/bank-of-england-hit-by-5-inflation-risk-from-war-in-iran), 9 March 2026. [^9]: [HomeOwners Alliance, "Will the Bank of England Cut Interest Rates on 30 April 2026?"](https://hoa.org.uk/news/interest-rate-predictions-2/), April 2026. [^10]: ITV News, Andy Haldane interview on Bank of England interest rates, March 2026. [^11]: [Bloomberg, "Bank of England Rate Setters Doubt Iran War Will Trigger UK Price Spiral"](https://www.bloomberg.com/news/articles/2026-03-26/bank-of-england-rate-setters-doubt-iran-war-will-trigger-uk-price-spiral), 26 March 2026. [^12]: [Vanguard, "Our Economic Outlook for the United Kingdom"](https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/vemo-united-kingdom.html), April 2026. [^13]: [Chatham House, "How Will the Iran War Affect the Global Economy?"](https://www.chathamhouse.org/2026/03/how-will-iran-war-affect-global-economy), March 2026.

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Hold the Line: Why the Bank of England Should Keep Rates at 3.75%