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Bank of England seen holding rates at 3.75% as gilt yields dip below 5%

Bank of England seen holding rates at 3.75% as gilt yields dip below 5%

UK inflation expectations fell again in July, reinforcing the case for a Bank of England hold as investors track easing oil-driven price pressures and the risk of delayed increases in fuel costs.

Fact Check
All elements of the claim are directly corroborated. The two tradingeconomics sources dated 2026-07-27 confirm UK gilt yields dipped below 5%, that easing US-Iran tensions and lower oil prices softened near-term inflation concerns, and that the BoE was widely expected to hold rates at 3.75%. The official Bank of England June 2026 page confirms the 3.75% Bank Rate with the next decision set for 30 July 2026, and the Parliament library confirms June CPI of 2.6%. This is a forward-looking expectation ('seen holding') for the 30 July 2026 meeting, consistent with the collected_at date.
Summary

Sterling fell below $1.33 to its weakest level in nearly a month as investors weighed developments in the Middle East and a firmer U.S. dollar, supported by lingering expectations that the Federal Reserve could still raise interest rates on Wednesday. A pause in U.S. attacks on Iran pushed oil prices lower and eased some inflation concerns, while UK inflation expectations also declined in July, adding to signs of softer price pressures before the Bank of England's policy decision later this week. The closely watched Citi and YouGov survey showed British public expectations for inflation in five or more years' time fell to 3.7% in July from 3.9% in June, while year-ahead expectations dropped to 3.4% from 3.8%. Markets widely expect the BoE to leave rates unchanged at 3.75% on Thursday after UK annual consumer price growth slowed to a 15-month low of 2.6% in June, below the central bank's projections. Citi economist Callum McLaren-Stewart said there was still a risk that delayed rises in pump prices could lift expectations slightly, but said the increase in July was well below what was seen in the second quarter and was unlikely to have a meaningful impact.

Terms & Concepts
  • U.S. Treasury yields: The returns investors demand to hold U.S. government debt, often used as a benchmark for interest-rate expectations.
  • inflation expectations: Measures of how much consumers or businesses think prices will rise in the future, closely watched by central banks for signs inflation could become entrenched.