Monetary Policy Report, February 2026 (Bank of England)

Summary

• The MPC voted by a majority of 5-4 to maintain Bank Rate at 3.75%, with four members voting to reduce it by 0.25 percentage points to 3.5%.p.5
• Bank Rate has been reduced by 150 basis points since August 2024.p.5
• CPI inflation was 3.4% in December, above the 2% target.p.6
• CPI inflation is projected to fall to 2.1% in 2026 Q2, a 0.7 percentage point greater fall than anticipated in the November Report.p.10
• Annual private sector regular AWE growth slowed to 3.6% in the three months to November, down from 4.4% in the three months to August.p.13
• Basic private sector pay settlements are expected to average 3.4% over 2026, down from an average actual settlement of 4.0% in 2025.p.14
• The unemployment rate remained at 5.1% in the three months to November.p.25

Key insights

1. The Ofgem price cap is expected to fall in April to £1,616 from £1,758, accounting for around one third of the expected decline in CPI inflation in the first six months of 2026.p.10
2. Public sector regular pay growth rose to 7.9% in the three months to November.p.14
3. Firms responding to the DMP Survey expect wage growth to fall by 0.7 percentage points to 3.7% by 2026 Q4.p.15
4. Underlying GDP is estimated to have grown by 0.1% in 2025 Q4, down from 0.2% in Q3.p.19
5. The household saving ratio fell to 9.7% in 2025 Q3 but remains higher than in the decade before the pandemic.p.21
6. Business investment growth was relatively robust at 2.7% in the year to 2025 Q3.p.22
7. Based on forward rates, the market curve implied that Bank Rate would fall to around 3.3% in 2026 H2.p.27