The Bank of England maintains a cautious stance on monetary policy after a narrow 5–4 vote on February 4, 2026, to hold the benchmark interest rate at 3.75%. Despite the hold, policymakers signaled a shift toward future easing, with four members already pushing for an immediate 0.25% reduction. This internal division highlights a critical pivot point for the UK economy. Inflation remains the central focus for the Monetary Policy Committee. The headline rate was recorded at 3.4% as of late 2025, which remains above the 2.0% target. However, projections suggest inflation will return to target levels by June 2026, aided by a projected 5% drop in energy price caps and government price-cutting measures. The labor market is showing significant signs of cooling, providing the Bank with more room to maneuver. The unemployment rate has risen to 5.1%, the highest level since 2021. Furthermore, private sector wage growth has slowed to 3.9%, its lowest in nearly five years. This "loosening" of the jobs market is a key indicator that inflationary pressures from earnings are receding. Economic growth remains fragile with the UK economy expanding by only 0.1% in the final quarter of 2025. Annual GDP growth for 2026 is forecast at a modest 0.9% to 1.0%. Business investment rose by 3.5% over the past year, but activity is heavily concentrated in the energy and technology sectors, leaving the broader economy stagnant. Financial markets are currently pricing in an 80% probability of two further rate cuts by the end of 2026, which would bring the Bank Rate down to 3.25%. A dovish shift in the Bank’s recent communications has led many analysts to expect the next 25-basis-point cut as early as the March meeting, provided upcoming inflation and labor data continue their downward trajectories. The coming weeks are essential for determining if the UK can achieve a "soft landing." Success depends on balancing the risk of persistent services inflation against the threat of a weakening economy that could slip into stagnation without further stimulus. [Bank of England interest rate decision](https://www.youtube.com/watch?v=SPZDIPMmht0) This video provides a professional breakdown of the latest Bank of England meeting, explaining the 5–4 split vote and what the current economic data means for future interest rate cuts. http://googleusercontent.com/youtube_content/0