BoE Keeps Rates on Hold Amid U.S.-Iran War Uncertainty

The Bank of England (BoE) kept interest rates on hold at 3.75% as it waits for clearer signs of how much the U.S.-Iran war will impact inflation, despite a collapse of a tentative truce prompting one policymaker to back a rate hike.

According to Reuters, the Monetary Policy Committee voted 6-3 to keep rates unchanged, with Catherine Mann joining Megan Greene and Chief Economist Huw Pill in voting for a rise to 4%.

BoE Governor Andrew Bailey expressed hope that keeping rates on hold would enable the central bank to avoid raising interest rates and adding to headwinds facing the economy, which was suffering from sluggish underlying growth before the conflict broke out.

Bailey emphasized that expectations of a rate hike in 2026 mostly reflected the risk of further escalation of the U.S.-Israeli war on Iran, rather than a view that tightening was needed to tame existing price pressures.