The Bank of England (BoE) announced today, 19th March, 2026, that it has decided to maintain the Bank Rate at 3.75%. The Monetary Policy Committee (MPC) voted unanimously to keep the rate unchanged. The MPC is the body within the BoE, the UK’s central bank, that is responsible for setting the country’s benchmark rate. Its 9 members also manage monetary policy to meet the government’s inflation target of 2%.
The UK’s central bank explained:
“Conflict in the Middle East has caused a significant increase in global energy and other commodity prices, which will affect households’ fuel and utility prices and have indirect effects via businesses’ costs. Prior to this, there had been continued disinflation in domestic prices and wages. CPI inflation will be higher in the near term as a result of the new shock to the economy.”
Inflation – 2% Target
Central banks’ monetary policies cannot influence global energy prices. Instead, they aim to ensure that economic adjustments to these price fluctuations occur in a way that sustainably meets the 2% inflation rate target.
The MPC explained that it is aware of the increased risk of inflationary pressure within the UK through second-round effects in pay and price-setting. It added that the longer energy prices remain high, the greater this risk will be.
MPC members and their teams are currently assessing how weakening economic activity could pull down the inflation rate. Higher energy costs, especially if they continue for an extended period, can slow down GDP growth.
The Committee added:
“The Committee will continue to monitor closely the situation in the Middle East and its impact on global energy supply and energy prices. It stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term.” CPI stands for Consumer Price Index.
Eurozone Rate
The European Central Bank (ECB) has kept interest rates unchanged despite geopolitical tensions in the Middle East, which are expected to push up inflation and undermine GDP growth.
In a press conference, Christine Lagarde, ECB President, said:
“We are well positioned to navigate this uncertainty. Inflation has been at around our two per cent target, longer-term inflation expectations are well anchored, and the economy has shown resilience over recent quarters.”
