Interest rates held as Bank warns of impact of high energy prices
Summary
The Bank of England decided to keep interest rates at 3.75% because of uncertainty about how high energy prices will affect the economy. Although oil prices have recently fallen, energy costs remain higher than before the conflict in the Middle East, which is causing ongoing inflation concerns.Key Facts
- The Bank of England’s Monetary Policy Committee has kept interest rates unchanged for the fourth time in a row at 3.75%.
- High energy prices, partly caused by the war in the Middle East, are putting upward pressure on inflation.
- Recent drops in oil prices are seen as a positive sign but prices are still above pre-conflict levels.
- Inflation is currently higher than the Bank expected earlier this year but is forecasted to fall to about 3.25% by the end of 2026, above the 2% target.
- Some committee members voted to increase the interest rate to 4%, citing uncertainty over the impact of energy costs on households and businesses.
- A recent US-Iran peace deal could ease energy supply worries if oil flow through the Strait of Hormuz returns to normal.
- UK energy bills are expected to rise by 13% in July due to regulator Ofgem’s price cap increase.
- Official data shows inflation steady at 2.8% in May and slowing food price increases, but transport costs have risen quickly.
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