BoE Holds Rates as Inflation Concerns and Energy Uncertainty Linger

The Bank of England (BoE) has decided to keep interest rates unchanged at 3.75%, despite some market expectations for a hike in response to inflationary pressures and energy market uncertainty.

According to Governor Andrew Bailey, the BoE is concerned about the impact of the war between the US and Iran on inflation, particularly due to the Hormuz Strait blockade that has been ongoing for five months.

Unlike the European Central Bank, which raised rates in June, Bailey emphasized that the signal given in March indicating no intention to cut rates quickly due to the threat from the war is likely to remain in place.

The BoE lowered its inflation forecast last month, predicting a peak of 3.25% this year, and natural gas prices have risen since then, but oil futures remain near the lower end of the Bank's baseline scenario.