The Bank of England has kept interest rates unchanged at 3.75%, with lessons from how other countries handled similar inflation challenges informing UK policy decisions. International comparison provides valuable insights.
The monetary policy committee’s 5-4 vote reflected awareness that many advanced economies experienced similar post-pandemic inflation surges. Comparing how different central banks responded and what outcomes resulted offers lessons for UK policy.
Countries that tightened policy aggressively brought inflation down quickly but often at the cost of significant economic slowdown. Those that maintained easier policy for longer saw more persistent inflation but less unemployment pain. The UK’s path—six cuts since mid-2024—represents a middle course informed by these international experiences.
The debate between committee members partly reflects different interpretations of international evidence. Some see other countries’ experiences confirming that premature easing risks inflation resurgence. Others see evidence that inflation is falling globally regardless of policy specifics, suggesting UK cuts are safe.
Governor Bailey’s projection that inflation will fall to around 2% by spring aligns with similar projections in many other advanced economies, suggesting common global forces at work. If inflation is falling worldwide due to supply chain healing and energy price normalization, UK-specific policy matters less. The GDP forecast of 0.9% and unemployment rising to 5.3% should be compared to other countries’ outcomes to assess UK policy effectiveness. Chancellor Reeves’s budget measures, including utility bill cuts and rail fare freezes from April, represent UK-specific tools not available everywhere. The forecast of 2.1% inflation by mid-2026 will be evaluated partly by comparison to other countries’ achievements.