BoE Set to Hold Rates as Oil Prices Surge

The Bank of England is likely to keep interest rates steady this week amid rising oil prices, but may slow down its quantitative tightening (QT) program.

Governor Andrew Bailey said last week that there was no 'secret plan' to raise interest rates this year unless the oil price surge translates into lasting domestic inflationary pressures.

Economists polled by Reuters unanimously predicted a hold on rates, and most expect the next move to be a cut rather than a hike. However, some analysts are now reconsidering their views.

Barclays interest rate strategist Moyeen Islam noted that the speed of oil price increases and hardening central bank rhetoric make a surprise 25 basis-point rate hike possible. Financial markets have priced in a 30% chance of a quarter-point rate hike on September 17, up from less than 10% last week.