BoE Holds Rates, but Future Policy Tied to Middle East Developments

The Bank of England (BoE) has kept its Bank Rate unchanged at 3.75%, as widely expected, with a vote split of 6-3 in favor of maintaining current levels.

While some MPC members now call for a hike, the BoE recognizes that inflation risk is less imminent and has lowered its inflation outlook to 2.6% one year ahead.

BoE Governor Bailey highlighted the lack of evidence of second-round effects on inflation but also noted that action may be needed before such effects appear.

The central projection incorporates two hikes in line with market pricing, but the BoE's future policy will heavily depend on developments in the Middle East.