Monetary Policy Report July 2026 (Bank of England)

Summary

• The MPC voted 6–3 to maintain Bank Rate at 3.75%; three members voted to increase it to 4%.p.5
• CPI inflation fell to 2.6%, although it is expected to rise later this year.p.5
• Motor fuel prices contributed 0.6 percentage points to CPI inflation in June.p.10
• Services price inflation fell from 4.5% in March to 3.6% in June.p.12
• Private sector regular AWE growth eased to 2.9% in the three months to May.p.13
• The Ofgem price cap rose to £1,663 in Q3 from £1,477 in Q2.p.17
• Indirect energy effects are projected to contribute around 0.5 percentage points to CPI inflation in December.p.18

Key insights

1. CPI inflation fell by 0.7 percentage points between March and June.p.10
2. June CPI at 2.6% was 0.4 percentage points lower than expected in the April Report.p.10
3. CPI inflation is projected to pick up to 3.2% in 2026 Q4.p.12
4. The Bank's Agents report average pay settlements of 3.5% for 2026, below 4.0% in 2025.p.14
5. Direct energy effects added 0.8 percentage points to CPI inflation on average in 2026 Q2 relative to the February Report projection.p.15
6. The gas futures curve was 33% above its level in the run-up to the February Report.p.16
7. The direct contribution of energy prices to CPI inflation is expected to be around 0.4 percentage points in 2026 H2.p.17
8. Food price inflation is projected to rise to nearly 3.5% in December 2026.p.18