Bank of England Stands Pat as Middle East Tensions Fuel Hawkish Shift

The Bank of England is expected to keep interest rates unchanged at 3.75% on Thursday, despite renewed conflict in the Middle East driving oil and gas prices higher.

Economists predict that policymakers will maintain a strategy of holding rates steady while using tougher language on inflation risks.

Rising global oil prices have pushed European gas prices to levels not seen since the early days of the conflict, increasing the likelihood of hawkish shifts and possible rate hikes as soon as September.

The case for keeping rates unchanged is supported by softer domestic inflation signals, including consumer price inflation easing to 2.6% in June and GDP growing 0.7% in the three months to May.