CBI responds to latest MPC decision on interest rates (September 2026)

Alpesh Paleja, CBI Deputy Chief Economist, said:

“The Bank of England has kept interest rates unchanged, but risks to the outlook for inflation have sharpened. Oil and gas prices have risen sharply, economic momentum has proven more resilient than expected, and there are early signs that wage settlements for the year ahead show little sign of easing. The MPC acknowledges that this raises the risk of higher inflation persisting for longer.

“For now, the MPC is taking some comfort from wage growth remaining muted and continued slack in the jobs market – which should limit the extent to which the energy shock feeds into broader price and pay pressures. Tighter financial conditions are also doing some of the Bank’s heavy lifting, while any de-escalation in Middle East tensions could still bring energy prices down relatively quickly. The combination of these factors should buy the committee some time to reassess the outlook in the weeks ahead.

“For now, we expect interest rates to remain at 3.75% for the rest of the year. But this announcement suggests that the case for staying on hold is weakening, especially if energy prices remain high or rise further. As a result, the Bank will be watching energy prices, firms’ pricing decisions and next year’s wage settlements particularly closely. It will also keep one eye on the forthcoming Budget, while recognising that the Chancellor has little room for a significant fiscal easing.”