BoE Keeps Rates Steady Amid Energy Price Worries, Markets Eye Japan

The Bank of England (BoE) kept its main interest rate at 3.75% despite higher inflation in the UK. The decision came as the BoE warned that it may have to raise rates if energy prices remain high due to the ongoing conflict in the Middle East.

Markets are already pricing in a 25-basis-point increase from the Bank of Japan (BoJ), which would lift its policy rate from 1.00% to 1.25%, its highest level in around three decades, according to a Reuters poll conducted earlier this month. All but two of 68 economists, or 97%, expect the central bank to raise rates.

The BoE's decision was made at its meeting ending on September 16, and it maintained its policy stance to ensure inflation comes down to 2% sustainably as the economy adjusts to the energy shock. However, the risk of second-round effects in price and wage-setting is greater if higher energy prices persist or become more volatile.