BoE Set to Keep Rates Steady Amid Energy Price Surge

The Bank of England is expected to keep interest rates on hold this week, despite a recent surge in energy prices. The central bank's decision will be closely watched by investors, who are awaiting any hint that the BoE may follow the example set by the US Federal Reserve, which raised borrowing costs yesterday.

Most economists polled by Reuters last week expected the BoE to leave its Bank Rate on hold at 3.75% for the rest of the year, with only three of nine Monetary Policy Committee members seen voting for a hike this week.

The recent jump in energy prices triggered by the Iran war is shifting opinion towards one - following hikes by the European Central Bank and the Fed. The latter raised borrowing costs on Wednesday and signalled further increases ahead, citing stubborn inflation pressure driven in part by a jump in energy costs.

UK inflation has been above target for most of the last five years, and British natural gas and Brent crude futures have leapt by almost 20% this month. This would push inflation - already at 3.1% in August - further above the BoE's 2% target.