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Thank you for following our live coverage of interest rates this afternoon. We will pause the blog for now, but will be back in the morning.
Make sure to come back to this page tomorrow to get the latest breaking news, analysis, and commentary on interest rates when the MPC announces their decision.
When will the interest rate decision be announced?
The Monetary Policy Committee’s (MPC) interest rates decision will be announced tomorrow (17 June) at 12pm.
Alongside the decision, the Bank will publish the minutes from the MPC meeting, where the committee’s thinking can be seen.
This document also has statements from each MPC member on why they voted the way they did.
Every other meeting, the Bank of England also publishes a Monetary Policy Report that sets out the economic analysis and inflation projections used by the MPC.
There will be no report published alongside the June meeting as one was published in April.
Why does conflict in the Middle East mean inflation in the UK?
The war in Iran has caused a significant global economic shock with trade being disrupted since 28 February as hostilities have made transporting goods through the region very risky.
The disruption has been particularly acute because the Strait of Hormuz, a narrow waterway between Iran and Oman through which around 20% of the world’s oil and gas is transported, has remained shut.
With such a large proportion of the world’s oil supply effectively stuck in the strait, oil prices have soared.
The average price of a barrel of Brent crude oil was around $70 before the start of the war, but once hostilities began prices became high and volatile. They peaked at around $114 a barrel in May, but hovered between $90 and $100 for the most part since February.
Following news that a peace deal had been reached between the US and Iran, prices plummeted as traders expect the Strait of Hormuz will reopen and allow the ships stuck there to continue on to their original destination.
But even if this peace deal is signed and comes into full effect, the economic consequences of the war will be felt for some time.
Though the oil supply is set to return to normal, the damage has already been done.
The price of oil impacts how much many everyday items cost. This includes more obvious things like petrol and diesel, but also goods you may not expect like crayons, plastic bags, and iPhones.
With prices being so high for four months, we can expect the hangover effects to last for the rest of the year and potentially spill into 2027. The hard work of restarting the whole process of oil production and distribution takes time.
An additional pain point for the UK from the war is energy prices. The closing of the Strait of Hormuz sent wholesale energy prices flying, and this will be reflected when the next price cap comes in on 1 July.
Millions of households in the UK will be shelling out around 13% more for their energy this summer, and prices are expected to remain broadly at this elevated level until at least 2027, according to most forecasts.
The economic backdrop to tomorrow’s announcement
The economic backdrop to tomorrow’s MPC meeting is a mixed picture. While May’s inflation figures were much lower than most economists expected, the rest of the economic news is not quite so rosy.
The UK economy shrunk in April as the country started to feel the economic disruption from the Iran war, figures from the ONS showed last week.
The economy contracted by 0.1% in the month to April, the first time negative growth figures were seen since August 2025.
The contraction is a far cry from the more positive growth figures in the first quarter of 2026, which showed the economy grew by 0.6%, indicating that the Iran war disrupted the start of an economic recovery for the UK.
Negative growth is a big worry for policymakers as it means the country is getting poorer as a whole.
When periods of economic contraction are prolonged, the effect is worse as firms see revenues dwindle and start to lay off staff – if the economy shrinks for two consecutive quarters, it officially enters a recession.
We are not quite at that point yet, but depending on how the economy responds to the economic shocks coming, we could get closer.
The Bank of England also closely monitors the labour market to help inform their interest rates decision.
The latest figures show unemployment climbed to 5% in the three months to March, bringing joblessness to its highest level in almost six years.
Meanwhile, wage growth is slowing. In the three months to March, wages grew by just 3.4%, also the slowest rate in six years.
Although high unemployment and slow wage growth are bad for individuals, according to the orthodox view of economics, a soft labour market does act as a disinflationary pressure in the economy – if you are laid off, your income falls and so does your spending.
That means that a poor jobs market can help lower inflation, which can in turn help persuade the MPC to cut rates.
What should we expect from tomorrow’s interest rates announcement?
Most economists agree that an interest rate cut is incredibly unlikely tomorrow as global economic conditions make this a risky move. If rates are cut at a time when many expect inflation to rise, it could exacerbate the issue.
Instead, many experts are forecasting that the MPC will choose to hold interest rates at 3.75% for the fourth consecutive meeting.
Today’s inflation data bolsters the case for a hold, as it undershot the Bank’s projection by 0.4 percentage points, helping paint a rosier picture of price growth.
With inflation holding steady compared to the April 2026 figure, the possibility of a rate hike in tomorrow’s announcement also becomes more unlikely, though future hikes are not off the table yet.
Experts at Oxford Economics forecast a hold at tomorrow’s meeting, expecting the MPC to vote 7-2 in favour of a hold.
Edward Allenby, senior economist at Oxford Economics, said: “Although energy prices remain elevated, most MPC members don’t appear close to voting for tighter policy.
“Early warning signs of indirect and second-round effects remain benign, and most members have argued that the weakness in the economy means the risks around the medium-term inflation outlook are two-sided. But these members are still likely to signal that they remain open to rate rises if necessary.”
Where have interest rates gone in the last decade?
Interest rates are currently at 3.75%, the lowest they have been since February 2023.
Before 2022, rates had languished under 1% for the most part as low interest rates were used as a tool to help stimulate the economy following the 2008 financial crisis and during the covid-19 pandemic.
But high rates have been the norm since 2022, when energy prices exploded in the wake of the Russian invasion of Ukraine. This led to high inflation and the start of the cost of living crisis, which we are still feeling the effects of today.
In order to tame inflation, the Bank of England quickly and aggressively hiked rates, going from 0.5% in February 2022 to 5.25% in August 2023.
Rates have since been gradually lowered, with the bank rate going from 5.25% in July 2024 to 3.75% in December 2025, where they have stayed.
Before the Iran war, most economists expected the Bank to cut rates at least twice in 2026, but few now expect this to happen.
They now either expect rates to stay at 3.75% for the rest of the year, or potentially rise depending on how deep the inflationary shock from the war will be.
What’s the link between interest rates and inflation?
Inflation is one of the most important, though not the only, economic indicators used by the MPC to help them set interest rates.
This is because the Bank of England has a mandate to keep inflation at 2%, a level of price growth that economic consensus deems healthy for an economy.
Most Western central banks, like the European Central Bank (ECB) and the US’s Federal Reserve (Fed), have an inflation target of 2%.
The Bank of England can use monetary policy to help keep inflation at the target level. The most important of these levers is the moving of interest rates.
Broadly speaking, when inflation is too high, the MPC will raise interest rates, and when it is too low, it will lower them.
These are not the only two reasons why interest rates are moved. For example, rates might be lowered if economic growth is too slow in a bid to speed up the economy.
ONS: Inflation held steady at 2.8% in May
Inflation held at 2.8% in the 12 months to May, as the lowest food inflation in 17 months helped offset high transport prices, the latest figures from the Office for National Statistics (ONS) show.
The figure undershot expectations from many economists who expected inflation to rise.
Although inflation is lower than many had forecasted, it is still significantly above the Bank of England’s 2% target and many economists expect it to rise this year thanks to the economic disruption from the Iran war.
The largest upwards contributor to inflation in May was the transport sector, where inflation was 6.8% in the year to May. Price growth for airfares, vehicle taxes, and motor fuel costs pushed May’s overall inflation up by 0.29 percentage points.
Much of this was offset by surprisingly low food inflation, which was the lowest in May since December 2024. Food prices rose by 2.2% in the 12 months to May, pulling overall inflation down by 0.07 percentage points.
Other notable downwards contributions to the inflation rate came from the housing and household services, furniture, clothing, restaurant, and recreation sectors.
For more detail and analysis on today’s inflation figures, you can read our inflation live report from earlier today.
What is the Monetary Policy Committee (MPC)?
The Monetary Policy Committee (MPC) is a group of nine experts who are responsible for setting interest rates.
The group is made up of five senior members of staff at the Bank of England, and four external experts who are there to make sure the MPC benefits from expertise outside the BoE. The committee is chaired by Andrew Bailey, the governor of the Bank.
They meet every six weeks and vote on whether to cut, hold, or raise interest rates. If there is a tie, then the Bank of England governor Andrew Bailey holds the deciding vote.
Interest rate decisions are usually announced on a Thursday, though the meeting itself typically takes place on the day before the announcement.
At their last meeting, the MPC voted to hold rates at 3.75%, with the motion passing by eight votes to one.
Good afternoon and welcome to MoneyWeek’s live coverage of tomorrow’s (18 June) interest rates decision.
The Bank of England’s Monetary Policy Committee (MPC) will meet today to decide where to take interest rates, and the decision will be announced on Thursday.
Follow along for the latest commentary and analysis on the upcoming decision and the breaking news tomorrow afternoon.