BOE Holds Rates, Signals Potential Hike Amid Iran War Inflation Fears

The Bank of England held interest rates at bay on Thursday but hinted that it may raise them soon to combat inflationary pressures stemming from the Iran war. Six members of the Monetary Policy Committee voted to keep rates unchanged, while three backed a quarter-point increase to four per cent.

Despite keeping borrowing costs steady, financial markets believe it's more likely than not that the bank will hike rates at one of the next two policy meetings in November or December.

The decision was widely anticipated, with Bank Governor Andrew Bailey emphasizing that higher global energy costs have had a limited effect on price and wage setting in the UK so far. However, he warned that this volatility will eventually impact inflation, making rate hikes necessary to ensure prices fall back to the two per cent target.