18 June 2026
If you are covering the Bank of England’s decision to maintain interest rates at 3.75%, please find below a comment from Lindsay James, investment strategist at Quilter:
“As was well telegraphed, the Bank of England has kept interest rates at 3.75%, with markets more concerned about whether hikes are still likely this year or if the narrative can shift back to cuts. Clearly the memorandum of understanding between the US and Iran has changed the landscape somewhat, but the benefits of this and a return to normality still seem a long way off.
“Whilst inflation was below expectations in May and currently under 3%, it is still likely to jump closer to 4% later in the year due to the coming impact a higher energy price cap. Furthermore, despite recent falls in the oil price, it remains higher than it was last year and the Bank of England will feel nervous about cutting rates in that scenario even with a stuttering labour market and uninspired growth. Furthermore, members acknowledged that a weaker labour market reduced the chances of the recent bout of inflation leading to higher wage demands, some felt that households are more aware than ever of how one has led to the other in recent years - a case of once burnt, twice shy.
“Like the Federal Reserve, therefore, they will probably be inclined to sit on the fence for a while yet and wait for further data as to how the Middle East situation resolves itself. You also have the added complication of political instability hitting the UK at the same time, with Andy Burnham expected to win the Makerfield byelection. Should we see Burnham win and a leadership contest that results in a lurch to the left, the growth hurdles facing the UK may become increasingly harder to clear and thus make the BoE’s job even more difficult than it already is today.”
