Economists: Despite surging oil prices, the Bank of England is expected to keep interest rates unchanged.
1 hours ago
Economists forecast that against the backdrop of renewed Middle East conflict and another surge in energy prices, the Bank of England will adopt a hawkish stance at this week’s meeting while keeping interest rates unchanged. Since the Monetary Policy Committee (MPC)’s last meeting in June, the collapse of the US-Iran ceasefire has pushed global oil prices back to near $100 per barrel, with European natural gas prices surging to their highest level since the start of the conflict. Oil prices could rise further if shipping lanes in the Gulf remain disrupted. The UK economy performed better than the MPC’s expectations in the early stage of the conflict, with GDP growing by 0.7% in the three months to May. There are few signs so far that the energy shock will trigger more persistent price pressures. The Consumer Price Index (CPI) has undershot expectations for three consecutive months, falling to 2.6% in June. Wage growth, a key source of inflationary pressure, has slowed, while food price increases have also eased. Economists say this will enable the MPC to hold interest rates at 3.75% at its Thursday meeting, while signaling it is prepared to tighten policy if energy prices rise sharply further or if one-off price shocks start to become more persistent.
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