BOE Set to Hold Rates Amid Oil Price Surge and Middle East Tensions

The Bank of England is expected to keep 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.

This decision comes amid easing inflation in recent months, with UK consumer price index inflation falling to a 15-month low of 2.6% in June. The slowdown in food and fuel prices has provided some relief for the Bank's Monetary Policy Committee (MPC).

However, economists expect inflation to swing back higher later this year as energy costs feed into household bills. Oil prices have surged above $100 per barrel due to concerns over supply disruption in the region.

Thomas Pugh, chief economist at RSM UK, believes oil prices will largely steer the path of interest rates for the next year. If prices remain close to $100 per barrel, a September rate hike is likely, with another in the winter.