The Bank of England is expected to keep interest rates on hold today (18/06) as policymakers assess the economic impact of the conflict in the Middle East.
Analysts widely expect the Monetary Policy Committee to leave the benchmark interest rate at 3.75% for the fourth meeting in a row. The decision will be announced at 12 pm BST.
Interest rates are the Bank’s main tool for controlling inflation, which measures how quickly prices are rising. UK inflation remains above the Bank’s 2% target, but recent figures were lower than many economists had feared.
Data from the Office for National Statistics showed inflation held at 2.8% in the year to May. Transport costs rose at the fastest rate, while food price rises eased, with meat, dairy and vegetable prices increasing more slowly.
The figures have strengthened expectations that the Bank will avoid another rate rise for now.
At its April meeting, the Bank warned that rates could rise again this year following a sharp energy price shock linked to the Iran conflict. However, oil prices have since fallen after US President Donald Trump said a peace deal with Iran had been signed, raising hopes that shipping through the Strait of Hormuz can return to normal.
Even so, analysts warn that UK energy bills may still rise because wholesale costs take time to feed through. Ofgem’s price cap is set to increase by 13% in July.
Mortgage borrowers are already feeling the pressure. Moneyfacts said the average two-year fixed mortgage rate rose to 5.60% on 17 June, up from 4.83% in March.
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