Fed and BOE Hold Steady on Interest Rates Amid Geopolitical Tensions

The Bank of England and the US Federal Reserve have made similar decisions to keep interest rates steady, despite geopolitical tensions. The Bank of England's Monetary Policy Committee voted 6-3 to maintain its base rate at 3.75%, with three members calling for a 25-basis-point hike.

Central bankers are balancing the risks posed by renewed US-Iran tensions and signs that domestic inflation pressures are easing more quickly than expected. UK policymakers, like their Federal Reserve counterparts, have adopted a 'hawkish pause', signaling that the next move will likely be a rate hike rather than a cut.

The Bank of England's baseline scenario projects inflation at 3.2% by year-end, while a downside scenario suggests it could climb above 4% by 2027. The UK's GDP growth rate is forecast to hover around 1% in both 2026 and 2027 before rebounding in 2028.