The Bank of England voted to keep its key interest rate on hold at 3.75% on Thursday, as widely expected by economists, as the Iran war continues to pose a dilemma for policymakers.
The central bank was widely expected to stand pat on rates as it waits to see how the energy price crunch caused by the Iran war, and a concurrent reignition of inflationary pressures in the U.K., manifest themselves in the economy.
The bank’s Monetary Policy Committee voted in an 8-1 split to maintain the benchmark rate, known as “Bank Rate”, at 3.75%, with known hawk BOE Chief Economist Huw Pill the only dissenter voting for a 25 basis-point increase.
The British pound was up 0.4% against the dollar, at $1.3473, after the decision, while borrowing costs fell as the yield on the benchmark 10-year gilt dropped 6 basis points to 5.014%.
In a summary of its decision-making on Thursday, the BOE said it expected war in the Middle East to continue to push energy and fuel costs higher, noting that its ability to mitigate these pressures with monetary policy was limited.
