BoE Holds Rates as Iran Conflict Clouds Inflation Outlook

The Bank of England (BoE) maintained interest rates at 3.75% on Thursday, as policymakers weighed the risks of higher energy prices against domestic inflation trends.

Following a 6-3 vote, Governor Andrew Bailey said the recent escalation in tensions involving Iran has introduced fresh uncertainty into the inflation outlook due to volatile oil and gas prices.

Bailey emphasized that 'the possibility of repeated resumptions of conflict, combined with lower than usual European gas stock levels and a fall in global refining output, mean that risks to energy prices lie to the upside.'

The governor acknowledged that underlying domestic inflation continues to moderate, but added that 'broadly, the process of underlying disinflation remains intact.'