Payment Radar
Bank of England Holds Interest Rate at 3.75% Amid Easing Inflation
The Bank of England's Monetary Policy Committee voted 5-4 to maintain Bank Rate at 3.75% in February 2026, despite four members preferring a cut to 3.5%.
What changed
The Bank of England’s Monetary Policy Committee voted 5-4 to keep the Bank Rate at 3.75% in February 2026. This marks the second consecutive meeting where the central bank held rates steady. Four committee members preferred a cut to 3.5%, but the majority cited easing pay growth and services price inflation. The Committee expects Consumer Price Index (CPI) inflation to return to the 2% target from April 2026, driven by energy prices and budget measures. While policy restrictiveness has decreased since August 2024, the Committee noted that further easing is likely but timing remains uncertain due to balanced risks between inflation persistence and weaker demand.
Why a business should care
Interest rate decisions directly influence borrowing costs for merchants and consumer spending power. Stable rates mean no immediate change in financing costs, but cautious consumer spending may impact sales. UK merchants accepting card payments will experience stable but elevated borrowing costs, potentially impacting inventory financing and terminal leases. Consumer spending remains cautious, which may reduce transaction volumes.
Who it affects
UK merchants with variable-rate debt, those financing inventory or payment terminals, and businesses in sectors sensitive to consumer spending, such as retail and hospitality.
What to consider doing
Pull your current variable-rate debt and financing agreements to understand the exact cost implications of the 3.75% rate and prepare for potential future adjustments.
Uncertainty and risks
Potential for delayed rate cuts could prolong high borrowing costs, while faster cuts might signal economic weakness, affecting consumer confidence. The timing of future rate decisions remains uncertain due to balanced risks between inflation persistence and weaker demand. The Bank of England maintained Bank Rate at 3.75% in February 2026, a decision held for the second consecutive meeting. Interest rate decisions influence borrowing costs for merchants and consumer spending power, directly impacting transaction volumes and operational expenses.
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