BoE Set to Hold Interest Rates Amid Global Economic Uncertainty

The Bank of England (BoE) is expected to keep interest rates steady on Thursday as it weighs the impact of ongoing global economic uncertainty, particularly the Iran war and its effect on oil prices.

BoE Governor Andrew Bailey has maintained that previously expected rate cuts are off the table due to the war's inflationary pressures. Unlike the European Central Bank (ECB), which raised rates in June, the BoE aims to keep a lid on inflation at just over 3.25% this year, down from its previous forecast of 3.6%-3.7%.

The U.S. Federal Reserve left rates unchanged on Wednesday, but three members of the Federal Open Market Committee (FOMC) expressed support for a quarter-point rate hike. Meanwhile, BoE economists predict that natural gas prices have risen since their last forecast, while oil price futures remain near the lowest of their scenarios.

Marcus Ryan, head of market strategy at Ebury, said 'neither current oil prices nor recent economic data warrant a hasty response.' The BoE is expected to publish its rate decision, policy minutes, and new economic forecasts on Thursday. Most economists polled by Reuters predict the Monetary Policy Committee (MPC) will vote 7-2 to keep rates steady at 3.75%.