BoE Set to Hold Interest Rates Amid Rising Middle East Uncertainty

The Bank of England is expected to hold interest rates at 3.75% next week, despite fresh uncertainty in the Middle East. Economists predict a seven-to-two vote in favour of holding the current rate.

Recent inflation figures show that UK consumer price index inflation eased back to a 15-month low in June, at 2.6%. A slowdown in food and fuel prices helped provide an early positive signal for new Prime Minister Andy Burnham.

However, inflation is now widely expected to swing back higher and further away from the Bank's 2% inflation target. The Bank has previously predicted that inflation will rise back to 3.25% later this year as higher energy costs feed into household bills from July.

Oil prices surged above $100 per barrel last week, amid concerns of supply disruption in the region. Governor Andrew Bailey is likely to address how renewed hostilities have influenced the Bank's outlook for inflation and how the committee is approaching its decisions on rates.