Bank of England Holds Rates Amid Rising Inflation Fears

The Bank of England has decided to keep interest rates at 4%, despite rising inflationary pressures. The decision was widely anticipated, with six members of the Monetary Policy Committee voting to maintain the status quo.

However, three committee members backed a quarter-point increase in interest rates, which would have taken borrowing costs to 4%. Financial markets believe it's more likely than not that the bank will raise interest rates at one of its next two policy meetings in November or December.

Bank Governor Andrew Bailey stated that higher global energy costs have had a limited effect on price and wage setting in the UK so far, but warned that prolonged volatility will increase the impact on inflation. He added that it's more likely the bank will need to raise interest rates to ensure inflation falls back to its 2% target.

The Bank of England expects inflation to rise to around 4% in the first quarter of next year from the current 3.1%, mainly due to another increase in domestic energy bills. Interest rates had been trending downward until the US and Israel attacked Iran in late February, causing sharp increases in oil and gas prices.