Bank of England holds rate at 3.75%
The Bank of England on Thursday held its policy rate at 3.75% but signaled that monetary policy may have to tighten if the conflict in the Middle East persists and increases the risk that higher energy costs spread to wages and broader prices, Anadolu reported.
“If the conflict in the Middle East persists for an extended period, as appears to be the case, and the risk of second-round effects emerging increases, it is likely that policy may ave to tighten,” Governor Andrew Bailey said.
The Monetary Policy Committee voted 6-3 to keep the Bank Rate unchanged, in line with market expectations. Megan Greene, Catherine Mann and Huw Pill favored a 25-basis-point increase to 4%.
Annual consumer inflation rose to 3.1% in August, remaining above the bank’s 2% target. Based on energy prices as of Sept. 14, inflation is expected to climb to around 3.75% in the fourth quarter of 2026 and slightly above 4% in early 2027.
The bank said the prolonged Middle East conflict had contributed to further increases in crude oil, natural gas and refined product prices, worsening the inflation outlook.
The three members supporting a hike said the expected inflation peak in early 2027 would coincide with wage negotiations, increasing the likelihood that higher energy costs would generate second-round effects.
The majority, however, judged that tight financial conditions and softness in the labor market were providing sufficient restraint for now.
