Bank Holds Interest Rate as Iran War Looms

The Bank of England has maintained its interest rate at 3.75%, but policymakers are warning that ongoing pressure to raise rates may be building due to the Iran war.

In a split vote among the nine-person monetary policy committee (MPC), six members voted to hold interest rates steady, while three called for a hike to 4%.

Bank Governor Andrew Bailey said that so far, higher global energy costs have had a limited effect on UK price and wage setting. However, he warned that the longer this volatility persists, the bigger its impact will be on inflation, making rate hikes more likely.

Economists are already warning of potential future borrowing cost increases to tackle rising UK inflation, which reached 3.1% last month, driven largely by petrol and diesel price spikes.