BoE Holds Fire on Rate Hikes as Oil Prices Fluctuate

The Bank of England (BoE) is expected to keep interest rates steady on Thursday, despite inflation pressures and a recent spike in oil prices. The decision comes as the central bank weighs the impact of the Iran war, which has closed the Strait of Hormuz for five months.

According to Reuters, BoE Governor Andrew Bailey has stated that previously expected cuts to borrowing costs are off the table due to the war, citing it as a factor in keeping inflation in check. Unlike the European Central Bank, which raised rates in June, the BoE is likely to maintain its current rate of 3.75%.

Economists polled by Reuters forecast the Monetary Policy Committee (MPC) will vote 7-2 to keep rates on hold. However, rate futures markets point to a quarter-point hike by November and another one by March 2027. The BoE is also likely to reduce its inflation forecast for this year, citing downward pressure from the electricity tax cut.