BOE Holds Steady Amid Iran War-Inflation Risks Persist

The Bank of England is expected to keep its key interest rate at 3.75% for another year, according to a Reuters poll of 70 economists. The poll found that only eight respondents believed the Bank would raise the rate by 25 basis points, while four saw it being reduced to 3.50%. A firm majority of 58 respondents expected no change in the next three years.

The poll's findings come as inflation remains above the central bank's 2.0% target. Inflation dipped to 2.6% in June, but this is unlikely to last due to rising oil prices caused by the re-escalation of tensions in the Gulf. The conflict has increased fuel costs, which are expected to continue rising.

BoE Governor Andrew Bailey expressed concerns about the impact of the renewed hostilities on Britain's inflation outlook earlier this month. However, so far, there is no significant impact on inflation expectations. The poll found that inflation will peak at 3.3% next quarter before moderating and not falling to the Bank's target until the end of 2027.

BoE Governor Andrew Bailey expressed concerns about the impact of the renewed hostilities on Britain's inflation outlook earlier this month. However, so far, there is no significant impact on inflation expectations. The poll found that inflation will peak at 3.3% next quarter before moderating and not falling to the Bank's target until the end of 2027.