Bank of England Holds at 3.75% as Governor Bailey Becomes Emotional Discussing Peter Mandelson

The Bank of England has kept interest rates unchanged at 3.75%, though the post-decision press conference was marked by Governor Andrew Bailey’s emotional response to questions about former minister Peter Mandelson’s conduct during the 2008-09 financial crisis. Bailey expressed shock at revelations that Mandelson leaked sensitive policy details to convicted offender Jeffrey Epstein.
The monetary policy committee voted 5-4 to maintain rates, with four members supporting an immediate cut. This narrow split suggests that further rate reductions are likely in the coming months, continuing the easing cycle that has seen six cuts since mid-2024. The decision balances improving inflation prospects against concerns about economic weakness.
In his official remarks on monetary policy, Bailey projected that inflation would fall to around 2% by spring, representing good news for the economy. He emphasized the importance of maintaining current rates to ensure inflation stays at this level, while indicating that conditions should permit additional cuts later in the year. When asked about the next meeting in March, he endorsed the market’s 50-50 assessment of a cut.
The press conference took an unexpected turn when Bailey addressed the Mandelson controversy. He said he was “shocked by what we are hearing” about lobbying that occurred during the financial crisis. Bailey appeared to become emotional when discussing the late chancellor Alistair Darling, with whom he worked closely during that period. He praised Darling’s honesty and decency, noting that Darling cannot defend himself today.
On economic matters, the Bank forecasts GDP growth of just 0.9% this year, down from 1.2% previously, while unemployment is expected to reach 5.3%. Chancellor Rachel Reeves’s budget measures, including utility bill cuts and rail fare freezes from April, are projected to drive inflation down to 2.1% by mid-2026, compared to 3.4% in December, marking substantial progress toward the 2% target.