Bank of England Warns Interest Rates May Rise Amid US-Iran Tensions
The Bank of England has warned that interest rates may rise if US President Donald Trump's war on Iran continues to impact Britain's economy. The central bank's monetary policy committee voted to keep interest rates at 3.75 percent, despite pressure to hike rates after an uptick in inflation.
However, policymakers warned that economic pressures sparked by conflict in the Middle East could lead to higher rates. Governor Andrew Bailey stated that while global energy costs have had a limited effect on UK prices and wages, their impact will increase if volatility persists.
The longer-term effects of high energy prices on inflation are a concern for the Bank of England. Bailey noted that holding interest rates at 3.75 percent is appropriate now but warned that if conflict in the Middle East continues, policy may need to tighten.
Most analysts predict an interest rate rise in November, 11 months after the last increase. The Bank's vote was 6-3, with several members believing a rate hike is necessary to offset inflation, which has risen to 3.1 percent due to higher energy costs.