UK MONETARY POLICY : 18 MAY 2026Bank of England rate-setter Megan Greene said on 18 May 2026 that central banks should not assume the inflationary impulse from energy prices will fade quickly. The comments arrive after three consecutive UK rate holds at 3.75% and renewed market expectations of a possible base rate rise.
Megan Greene, an external member of the Bank of England's Monetary Policy Committee, said on 18 May 2026 that central banks should not assume that the inflationary impulse from the current period of high energy prices will fade on its own. The comments reinforce the hawkish tilt in the MPC's communications since the renewed escalation of the Iran conflict and reflect a broader shift in the rate path that markets are pricing for the second half of 2026.
The MPC held Bank Rate at 3.75% at its 30 April 2026 meeting. This was the third consecutive hold, following the cut path that had run from August 2024 through to early 2026. UK CPI inflation rose to 3.3% in March 2026 from 3.0% in February. The Office for National Statistics attributed the increase principally to motor fuels. The MPC's April Monetary Policy Report set out a range of scenarios in which UK CPI peaks anywhere from 3.6% in mid-2026 to above 6% in early 2027, depending on the path of oil prices and second-round wage and price effects.
Key Facts
- Bank Rate held at 3.75% on 30 April 2026 (third consecutive hold)
- UK CPI inflation: 3.3% in March 2026, up from 3.0% in February
- Megan Greene is an external MPC member
- April 2026 MPR central scenario: oil $85 to $100, CPI elevated through 2026
- April 2026 MPR high scenario: oil above $130, CPI above 6% in early 2027
- Money market pricing has shifted from expected cuts to possible hikes through 2026
What Megan Greene actually said
Speaking on 18 May 2026, Greene cautioned against the assumption that central banks could look through the energy price shock as a temporary supply-side disturbance. Her argument was that the longer elevated energy prices persist, the greater the risk that the impulse becomes embedded in wage and price expectations through second-round effects. Once that happens, central banks face a much harder unwinding task than they would by acting earlier.
The comments are consistent with the framework Greene has set out in earlier speeches: that supply-driven inflation cannot be fully addressed by monetary policy, because higher interest rates do not increase oil production or reduce geopolitical risk, but that monetary policy nonetheless has a critical role in keeping inflation expectations anchored. A policy response is justified, on this view, not because higher rates fix the supply problem but because they prevent the supply problem from contaminating the broader inflation dynamic.
The voting pattern on the MPC
The MPC's 30 April 2026 vote on Bank Rate was not unanimous, although the majority voted to hold. The Bank publishes the voting record in the minutes accompanying each rate decision. Through 2025 and into 2026, the MPC has included members on both sides of the median view, with hawks pushing for earlier action against persistent inflation and doves emphasising the weakness of UK growth and the fragility of the labour market.
The recent rotation of external MPC members and the changing balance between hawks and doves matters because the marginal vote determines policy decisions. Markets read both the headline decision and the voting pattern to calibrate the trajectory from here.
What this means for UK savers
Higher-for-longer expectations have implications for UK savings rates that work in the opposite direction to mortgage borrowers. Savings rates are set by deposit-taking banks and building societies based on their funding strategy and the prevailing rate environment. When market expectations shift toward sustained or rising Bank Rate, providers tend to maintain or improve savings rates, particularly on fixed-term products where they are locking in customer money against expected future funding costs.
The current spread between leading easy-access accounts and fixed-term deposits has narrowed somewhat since late 2025, reflecting market uncertainty about the direction of rates. ISA allowances for the 2026/27 tax year remain at £20,000, with the breakdown across cash ISA, stocks and shares ISA, innovative finance ISA and lifetime ISA components governed by HMRC rules. The Financial Services Compensation Scheme limit of £85,000 per eligible depositor per authorised firm protects savings deposits.
The base rate path the market is pricing
Before the Iran conflict began on 28 February 2026, money markets had been pricing in a continuation of the cutting cycle that took Bank Rate from 5.25% in August 2024 to 3.75% in early 2026. The expectation was for further cuts to a terminal rate of around 3.25% by the end of 2026. The conflict, the subsequent rise in gilt yields and the hawkish shift in MPC communications have reversed that picture.
As of mid-May 2026, market pricing now reflects a possible Bank Rate increase by the end of 2026 rather than a cut. The exact level of expected rates fluctuates daily with gilt yields and oil prices. The Bank of England has not provided forward guidance on the direction of the next move, instead emphasising data dependence and the scenario range set out in the April Monetary Policy Report.
What households should take from this
For mortgage borrowers, the practical implication is that the brief window of falling fixed-rate mortgage deals through April 2026 may be narrowing or reversing. Borrowers with deals expiring in the next six months can reserve a new fixed rate now and switch if the market improves before completion.
For savers, the implication is that fixing for longer at current rates carries more upside than it would in a falling-rate environment. The trade-off is liquidity: fixed-term deposits lock the money away for the term of the product, although most allow penalty-bearing early withdrawal under specific circumstances. The right balance between fixed-term and easy-access depends on cash flow needs and the buffer the household holds in instant-access accounts.
For both groups, the broader signal is uncertainty. The MPC's own scenario range from April spans inflation outcomes from 3.6% to above 6% over the next 18 months. That is the size of the band the Committee is working with, which is why forward guidance has been so cautious and why individual MPC members are publicly emphasising the risks rather than the central case.
Disclaimer: This article is for general information only and does not constitute financial, savings or investment advice. Interest rate forecasts are uncertain, savings rates change frequently, and individual financial circumstances vary. Anyone making decisions about savings products, mortgage timing or rate fixing should obtain advice from a regulated professional. Kael Tripton Ltd is not authorised or regulated by the Financial Conduct Authority.
Frequently asked questions
What did Megan Greene say about UK interest rates
Bank of England external MPC member Megan Greene said on 18 May 2026 that central banks should not assume the inflationary impulse from the current high energy price environment will fade on its own. Her view is that monetary policy has a role in keeping inflation expectations anchored even when the inflation source is supply-driven.
What is the current Bank of England base rate
Bank Rate is 3.75%, held at that level by the Monetary Policy Committee on 30 April 2026. This was the third consecutive hold, following the cutting cycle that began in August 2024.
Will UK interest rates go up in 2026
Market pricing as of mid-May 2026 reflects a possible Bank Rate increase by the end of 2026 rather than a cut. This is a reversal from late 2025, when further cuts were expected. The actual decision will depend on inflation data, energy prices and labour market developments through the year. The Bank of England has not provided forward guidance.
What is the UK ISA allowance for 2026/27
The ISA allowance for the 2026/27 tax year is £20,000. This can be split across cash ISA, stocks and shares ISA, innovative finance ISA and lifetime ISA subject to HMRC rules. The lifetime ISA has a separate £4,000 annual limit that counts toward the overall £20,000 figure.
How are UK savings rates set
Savings rates are set by individual deposit-taking banks and building societies based on their funding strategy, the prevailing Bank Rate, and competition for retail deposits. When market expectations move toward higher rates for longer, providers tend to maintain or improve savings rates, particularly on fixed-term products.
Related guides
- Best UK Savings Accounts
- Best UK Regular Savings Accounts
- UK Mortgage Rates and the Iran War
- UK Bank Ring-Fencing Reform
Sources and verification
- Bank of England, "Monetary Policy Report" (April 2026)
- Bank of England, MPC meeting outcome and voting record (30 April 2026)
- Reuters reporting on Bank of England MPC member Megan Greene (18 May 2026)
- Office for National Statistics, "Consumer price inflation, UK: March 2026"
- HM Revenue and Customs, ISA rules and limits for 2026/27
- Financial Services Compensation Scheme deposit protection rules
