Bank of England Holds Firm on Interest Rate as Iran Conflict Looms

The Bank of England is expected to hold its key interest rate steady at 3.75% on Thursday, according to all 70 economists polled by Reuters. The consensus among experts is that the central bank will not raise rates this year or for another year, as inflation is forecasted to remain above the 2.0% target.

The latest inflation data showed a slight dip in June to 2.6%, but analysts warn that this reprieve may be short-lived due to the ongoing tensions in the Iran conflict, which has pushed fuel prices higher. The conflict's resurgence has reignited concerns about second-round effects on inflation and the potential for rate hikes.

Despite new Prime Minister Andy Burnham's pledge to cut living costs, funding details have yet to be revealed, leaving some uncertainty about how this goal will be achieved.

The European Central Bank left its key deposit rate unchanged at 2.25% on Thursday, while a separate Reuters poll predicted it would raise rates for the second time this year in September, taking it to 2.50%. Experts warn that inflationary pressures remain elevated and may continue to rise due to the re-escalation of hostilities in the Gulf.