BoE to Hold Rates Amid Rising Energy Prices

The Bank of England is expected to keep interest rates on hold at 3.75% when it meets this week, but investors are watching for signs that surging energy prices could force a hike.

Most economists polled by Reuters last week predicted the BoE would leave its Bank Rate unchanged for the remainder of the year, with only three out of nine Monetary Policy Committee members expected to vote for an increase.

However, the recent jump in energy costs is shifting opinion towards a hike, following the lead of the European Central Bank and the US Federal Reserve. The latter raised borrowing costs on Wednesday and signalled further increases ahead due to stubborn inflation pressure driven by a jump in energy costs fuelled by the war with Iran.

The UK's inflation rate 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 could push inflation further above the BoE's 2% target, currently at 3.1%, which the central bank has missed in all but three months.