BoE Holds Fire on Rate Hikes Amid War-Driven Energy Price Surge

The Bank of England is expected to keep interest rates steady at 3.75% for the rest of this year and through mid-2027, according to a Reuters poll of economists.

This decision comes as the ongoing U.S.-Israeli war on Iran has driven up energy prices, but so far, there's been no significant evidence that these higher costs are filtering through to wider UK inflation.

Economists polled by Reuters expect the Monetary Policy Committee (MPC) to leave rates on hold at its September 17 meeting, with nearly 90% of respondents anticipating no change for the rest of this year. Eight economists, however, predict a rate rise to 4.00% by the end of the year.

The MPC's next move is forecast for the third quarter of 2027, when a quarter-point cut is expected, according to the median prediction. Inflation is predicted to average 3.1% this year before falling to 2.5% in 2027 and 1.9% in 2028.

Economists warn that upside risks to rates include higher global bond yields and energy prices, but policymakers appear patient due to contained inflation and modest economic growth.