Bank of England Holds Rates at 3.75% With 7-2 Vote Split; Mortgage Cuts Expected in Coming Weeks
The Bank of England held its main interest rate at 3.75% on Thursday with a 7-2 MPC vote split. The hold is the BoE’s fourth consecutive following the start of the US-Iran war. The MPC cited the easing Iran-war-induced inflation pressures and oil-price risks as justifying the cautious wait-and-see stance. Mortgage lenders are widely expected to cut rates in the coming weeks regardless. The FTSE 100 closed at 10,720; sterling firmed to $1.3380 on the hawkish-hold framing; UK 10-year gilt yields edged up to 4.82%. Bank of America commentary keeps the August Bank Rate cut probability above 40%.
The 7-2 hold-vs-cut MPC split is materially more hawkish than the 6-3 split market consensus going into the meeting; that explains the sterling firming and gilt-yield uptick relative to the morning pre-meeting positioning. The two dissenting MPC members are reportedly Catherine Mann and Swati Dhingra, both consistently dovish through 2026. The Iran-deal-driven oil-price drop materially eases the BoE’s inflation outlook through Q3; the wait-and-see framing is consistent with the August cut probability remaining elevated. The political-mathematical question for Chancellor Rachel Reeves is whether the leadership-transition uncertainty crystallises before the post-Makerfield Friday-evening cycle.