BOE Expected to Hold Rates as Inflation Risks Linger

The Bank of England (BOE) is expected to keep interest rates unchanged at 3.75% for the remainder of the year, despite inflation risks and rising energy prices. According to a Reuters poll, nearly 90% of economists believe the BOE's Monetary Policy Committee will leave rates untouched, up from 83% last month.

The UK economy has shown resilience since the US-Israeli war on Iran began in late February, with little evidence of spillover into the broader economy. However, inflation is forecast to rise above 3% later this year, according to the BOE's quarterly forecasts.

Elizabeth Martins, a UK economist at HSBC, noted that a big rebound in energy prices would change things, but the real game-changer for the MPC is around second-round effects. Crude oil prices are still about 25% above pre-war levels as the Strait of Hormuz remains closed.