Bank delivers good news on the cost of borrowing, but bad news on the cost of living

18th September 2026

The Bank held interest rates as expected in its MPC meeting Thursday), with the real news coming from a welcome change in how it intends unwind Quantitative Easing (QE) and a gloomy outlook on the cost of living, the Resolution Foundation said today.

James Smith, Chief Economist at the Resolution Foundation, said, “The Bank’s decision today to hold interest rates was welcome but expected. The real news instead came via an overhaul of how it unwinds QE and a gloomy outlook for inflation.

“The Bank provided welcome clarity on how it plans to run down its stock of gilts bought as part of its QE program. Allowing the Debt Management Office to manage the process, avoiding large sales of unwanted long-dated bonds, is welcome as it will ease upward pressures on the cost of government borrowing.

“But while there was welcome news on the cost of borrowing, the outlook on the cost of living was sobering. The Bank’s forecast of a 24 per cent rise in the energy price cap this January would mean bills soaring during the coldest months of the year, while 4 per cent inflation will mean pay packets shrinking sharply in real terms.

“This gloomy forecast should focus the government’s mind on the need to have targeted support with energy bills ready in time for this winter.”