Bank Holds Interest Rates as Energy Prices and Chip Shortage Loom
The Bank of England has decided to hold interest rates at 3.75% for the fifth consecutive time, despite concerns that energy prices and a shortage of memory chips will drive inflation higher.
According to forecasts by the central bank, energy prices, particularly oil, are expected to rise due to the ongoing conflict in the Middle East, pushing energy costs up for both households and businesses. This is likely to cause inflation to increase again later this year, with a predicted peak of 3.2%.
The Bank also warned that food prices will rise, reaching nearly 3.5% by the end of the year, due to supply issues linked to hot and dry weather conditions caused by El Nino.
The central bank's governor, Andrew Bailey, stated that 'inflation has fallen faster than we'd expected, but the conflict in the Middle East continues to mean high and volatile energy prices. That will cause inflation to rise again later this year.'