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Bank of England holds UK interest rates at 3.75%
Officials said domestic inflation pressures are absent, but the Middle East conflict could keep oil prices elevated and raise the risk of second-round effects.
The Bank of England’s monetary policy committee decided to hold UK interest rates steady at 3.75% on Thursday, citing concerns that inflationary pressure tied to the Middle East conflict could linger longer than expected, according to the Guardian Business. The decision reflects the view that underlying inflation pressures are almost entirely absent in the domestic economy, with prices described as stable and, in the absence of the war, on track toward the central bank’s 2% inflation target. Bank officials said they worry that firms could take advantage of expectations that the conflict has increased production costs, potentially leading retail prices to ratchet up. They also flagged a risk that workers might anticipate further inflation and push for larger wage increases, though the committee said it has not yet seen evidence of those patterns. The Bank pointed to “few signs” of second-round effects so far, while noting it is not yet enough evidence to rule out the risk and that it will continue monitoring. It added that annual wage growth is low across the private sector at 2.8% in the second quarter, with expectations for 3% in the third quarter.