BoE Holds Rates Amid US-Iran War Uncertainty

The Bank of England kept interest rates at 3.75% on Thursday, voting 6-3 to maintain the status quo as it waits for clearer signs of how much the US-Iran war will impact inflation.

While most economists expected a 7-2 split in favor of a rate hike, the committee voted 6-3 to keep rates unchanged. Catherine Mann joined Megan Greene and Chief Economist Huw Pill in voting for a rise to 4%, but the other MPC members stuck with Governor Andrew Bailey's wait-and-see approach.

Bailey said that expectations of a rate hike later this year mostly reflected the risk of further escalation of the conflict, rather than a need to tame existing price pressures. He also emphasized that there had been no shift in the BoE's overall thinking about the need for higher borrowing costs.