BoE Holds Rates Amid War-Driven Inflation Fears

The Bank of England is expected to hold interest rates steady for the rest of this year and through at least mid-2027, according to a Reuters poll of economists. The majority of respondents, nearly 90%, believe that rates will remain at 3.75% due to inflation concerns stemming from the ongoing U.S.-Israeli war on Iran.

Energy prices have increased due to the conflict, but so far, there has been no evidence of higher energy costs filtering through to inflation in the wider economy. This has given policymakers more room to watch how the economy performs over the coming months.

Financial markets are pricing three rate hikes through the middle of 2027, starting in November. However, economists such as Gabriella Willis from Santander CIB believe that there are no 'flashing warning signs' for the Bank to raise rates yet.