Bank of England Holds Rates Amid Rising Inflation and Conflict Fears

The Bank of England has decided to keep interest rates at 3.75pc, despite pressure from some policymakers to raise them in response to rising inflation and the ongoing conflict in the Middle East.

The decision was made by the Monetary Policy Committee (MPC), which voted 6-3 to hold rates steady. Governor Andrew Bailey said that while higher global energy costs have had a limited impact on UK prices so far, this could change if volatility persists.

The MPC expects inflation to rise to around 3.75pc by the end of 2026 and peak at about 4pc in early 2027. This is partly due to the ongoing conflict in the Middle East, which has pushed up global energy prices and driven UK households' petrol and diesel costs to multi-year highs.

The MPC also warned that the conflict's impact on energy prices could lead to higher borrowing costs in the future, with Governor Bailey stating that 'the longer this volatility persists, the bigger the impact it will have on inflation, and the more likely it is we will need to raise [the] bank rate to ensure that inflation falls back to our 2pc target'.