Bank of England leaves interest rates on hold and lowers inflation forecast amid Middle East ‘uncertainty’ – business live
Summary
The Bank of England has decided to keep the UK interest rate at 3.75%, choosing not to raise it despite some calls to do so. The bank also lowered its forecast for inflation, citing uncertainty caused mainly by recent events in the Middle East that have affected global energy prices.Key Facts
- The Bank of England kept the interest rate at 3.75%, with 7 members voting to hold and 2 wanting to increase it to 4%.
- Energy prices have fallen since the last meeting but remain higher than before the Middle East conflict began.
- The Bank believes monetary policy cannot control energy prices but aims to manage the economy’s adjustment to those price changes to keep inflation near 2%.
- Inflation forecasts were lowered due to these uncertain factors, especially those linked to the Middle East.
- The Bank had cut rates six times earlier in 2024 but paused to observe economic effects related to energy price shocks.
- The Middle East conflict, especially events following President Trump’s Operation Epic Fury and Iran’s impact on oil supplies, is seen as a major source of uncertainty.
- UK financial industry groups showed caution about government plans to reform banking rules and the Financial Ombudsman Service.
- Recent economic indicators include a fall in the UK unemployment rate to 4.9% and a drop in the British pound to a 10-week low against the dollar.
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