BOE to Hold Steady as Iran War Rises

The Bank of England is expected to keep its key interest rate at 3.75% for now, according to all 70 economists in a Reuters poll. The decision comes as British inflation dipped to 2.6% in June, but the slowdown may be short-lived due to the ongoing Iran war and rising oil prices.

The Monetary Policy Committee is likely to keep rates steady, with only eight respondents expecting a 25-basis-point hike and four anticipating a reduction to 3.50%. Ellie Henderson at Investec said, 'The situation is extremely fluid, and the risks certainly are we do indeed see a rate hike this year. However, for now, I think the MPC are basing their decision off the other fact policy is already in restrictive territory.'

Inflation is expected to peak at 3.3% next quarter before moderating, but will not fall to the Bank's target of 2.0% until the end of 2027.