BOE Stays Put as Oil Prices Surge

The Bank of England is expected to keep interest rates steady at 3.75% on Thursday, despite a recent spike in oil prices above $100 a barrel. The bank's decision comes as inflation has dropped to a 15-month low of 2.6% in June, below the BoE's forecasts.

Economists polled by Reuters do not see any real chance of a rate rise this week, but some markets expect a quarter-point hike by September or November. The split on the longer-term outlook is sharp, with interest rate futures pricing in a two-in-three chance of a rate rise in September and almost three moves by next June.

BoE Chief Economist Huw Pill fears a second oil price shock could make households and businesses expect higher inflation for years to come. However, Governor Andrew Bailey has said the bank does not need to raise rates like the ECB because it had cut them by less before the Iran war started at the end of February.