BOE Holds Interest Rates at 3.75%, Despite Worrying Signals from Iran

The Bank of England's monetary policy committee voted to keep interest rates at 3.75% for the fifth time this year, despite a bigger-than-expected drop in inflation last month.

The decision was in line with most economists' expectations and highlights growing tensions within central banks about how to respond to stubbornly high inflation and concerns that the war in Iran will lead to another round of price increases.

The committee's summary noted that 'the impact of the energy shock on the UK economy remains uncertain,' and that interest rate changes required to meet the 2% inflation target would depend on the scale and duration of the shock, as well as its propagation through the economy.

Three policymakers disagreed with the decision, voting to raise rates by a quarter point to 4%, citing concerns about 'more insidious second-round effects driven by catch-up dynamics in wage and price setting.'