Bank of England expected to leave interest rates on hold as oil and gas prices surge; UK pay growth hits five-year low– business live | Business
Introduction: Bank of England’s interest rate decision today
Good morning; Welcome to our in-depth coverage of business, financial markets and the world economy.
The world’s central bankers now face a quandary. Given that the Middle East crisis is driving up energy prices, inflation risks remain and economies look weak, should they lower borrowing costs to support growth or raise prices to keep them down?
There is a strong desire to wait and see rather than make a choice yet.
That’s why Bank related to England Interest rates are expected to remain unchanged at noon following the last monetary policy committee meeting.
Before the start of the Iran war, an interest rate cut was seen as an 80 percent possibility by the money markets. But now, with oil above $100 per barrel, markets show there is a 97% chance the BoE will keep interest rates at 3.75% today.
Ajith Nair, CIO Isıo Investment Management, explains:
“Expectations for interest rates in the UK have changed significantly in recent weeks, with markets now forecasting that the Bank of England will keep interest rates at 3.75% in March despite previously pricing in a cut.
This was mainly due to the increase in oil and gas prices associated with the Iran conflict, which increased inflation risks. This creates a difficult environment for both policymakers and investors. In fixed income markets, UK government bonds have come under pressure at times; Yields have been rising as interest rate cut expectations faded and have partially recovered recently. Shorter-dated bonds now reflect a more uncertain path for policy rather than a simple easing cycle.
European Central Bank Interest rates are expected to remain constant today.
Bank related to Japan It turned things around overnight without changing lending interest rates. Bank of Canada I did it yesterday.
Last night, Federal Reserve The US left interest rates unchanged and warned that “the impact of developments in the Middle East on the US economy is uncertain.”
agenda
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07:00 GMT: UK workforce report
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8.30 GMT: Riksbank interest rate decision
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Noon GMT: Bank of England interest rate decision
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13.15 GMT: European Central Bank interest rate decision
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1.45m GMT: European Central Bank press conference
important events
Charts: How UK gas prices hit three-year high
This chart shows UK gas prices rising above 170p per therm today as the Iran war has caused prices to more than double since the end of February.
This increase is likely to increase household energy bills this summer unless the conflict in the Middle East subsides in intensity.
But prices are still much lower than they were shortly after Russia invaded Ukraine, when prices rose above 500 pence per therm.
Conflict in Middle East ‘scares markets’ as gas and oil prices rise
According to reports, the rise in oil and gas prices this morning and the slowdown in wage growth in the UK are the main issues to watch in the markets today. Kathleen Brooks, research director at XTB:
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Brent crude reached $113 a barrel, one of its highest levels since the conflict began. The escalation of conflict is spooking the market, and futures markets are predicting huge losses for stocks at the open as risk perception worsens. Oil is leading the bus in this market, and wherever it goes, risk sentiment will follow.
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Natural gas prices started to rise again after the attacks on Qatar’s Ras Laffan gas field and increased by 30 percent. This led President Donald Trump to call on Israel and Iran to stop targeting energy fields. But it will take a lot of positive sentiment and news flow for energy prices to calm down today.
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UK labor market data was not as bad as feared, with the unemployment rate remaining steady at 5.2% and the UK labor market remaining little changed at the start of the year.
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There are signs that businesses are hiring once again; The ONS reported that the number of workers on payroll increased by 6,000 in January and estimates a further 20,000 workers on payroll were added in February. The vacancy rate is stable; declines in small firms are offset by job gains in large firms. This shows that the business outlook has improved at the beginning of the year compared to the end of 2025.
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The big news is that wages in the UK have fallen to their lowest level in 5 years and wage growth in both the private and public sectors is slowing. This is one of the bright spots in the otherwise weak outlook for UK inflation. Today’s data continues to support the BOE, which is concerned about the growth outlook. Conflict in the Middle East continues to dominate and a major de-escalation will be required at this stage to boost market sentiment and lower energy prices.
Wage growth in the UK has been particularly weak when you take inflation into account.
The real regular wage (adjusted for the consumer price index) fell to just 0.5% in the November-January period. This is the lowest level since May-July 2023.
Annual real total wage growth (using CPI) fell to 0.7% in the quarter.
Wage growth in the UK is at its lowest level in five years
UK wage growth has slowed to a five-year low, a worrying sign for workers as the Middle East crisis drives up energy costs.
According to the Office for National Statistics report, average pay (excluding bonuses) increased by 3.8% annually in the three months to January, from 4.1% in October-December 2025.
The annual increase in total wages (including bonuses) slowed to 3.9% in the November-January period, from 4.2% in the previous month.
For both wage measures, this is the slowest growth since September-November 2020.
Today’s UK labor market report also shows that the unemployment rate remains at a five-year high at 5.2%.
Luka Bartholomew, Deputy Chief Economist at Aberdeen, says:
“With unemployment remaining steady at 5.2% and a rare increase in payroll employment, this report paints a slightly more positive picture of the labor market. “With wage growth softening again, in normal times this would be a relatively reassuring report for the Bank of England.
But the report looks stale given inflation risks from the conflict in Iran and the massive rise in energy prices. So while today’s meeting of the Bank of England once looked like the likely point of the next rate cut, policy is scheduled to be suspended today as policymakers give themselves more time to see how the dispute plays out.
Negative supply shocks are difficult for central banks to manage because they simultaneously increase inflation and reduce growth. This dilemma is particularly acute for the BoE at the moment, as UK growth is already weak and inflation expectations are also less pegged. “So while we think the hurdle to returning to rate hikes is very high, further rate cuts could be significantly delayed.”
Gas prices in the UK increased by 25 percent as the Middle East crisis escalated
Gas prices in Europe are increasing this morning as well.
Reuters noted that the wholesale gas price in the UK next month rose 25.5% this morning to 175 pence per therm, reaching its highest level since August 2022.
The continental gas price also skyrocketed. The “Dutch front-month wholesale gas price” increased by over 31% to 71.7 euros per Megawatt hour, reaching its highest level since the end of December 2022.
Investors are reacting to the tension in the Middle East yesterday, where Israel attacked the world’s largest South Pars gas field and Iran attacked the world’s largest liquefied natural gas facility in Qatar.
In response, Donald Trump threatened to “massively blow up” South Pars if Iran attacked Qatar again:
Oil increased by 6 percent today
The rapid rise in oil prices today further increases the distress experienced by central bankers.
As tensions increased in the Middle East, Brent crude oil increased by 5.9% to $113.76 per barrel.
Israel’s attack on Iran’s giant South Pars natural gas field yesterday showed that the war has escalated, with the Iranian Revolutionary Guard threatening to target oil and gas facilities in the region in response.
Introduction: Bank of England’s interest rate decision today
Good morning; Welcome to our in-depth coverage of business, financial markets and the world economy.
The world’s central bankers now face a quandary. Given that the Middle East crisis is driving up energy prices, inflation risks remain and economies look weak, should they lower borrowing costs to support growth or raise prices to keep them down?
There is a strong desire to wait and see rather than make a choice yet.
That’s why Bank related to England Interest rates are expected to remain unchanged at noon following the last monetary policy committee meeting.
Before the start of the Iran war, an interest rate cut was seen as an 80 percent possibility by the money markets. But now, with oil above $100 per barrel, markets show there is a 97% chance the BoE will keep interest rates at 3.75% today.
Ajith Nair, CIO Isıo Investment Management, explains:
“Expectations for interest rates in the UK have changed significantly in recent weeks, with markets now forecasting that the Bank of England will keep interest rates at 3.75% in March despite previously pricing in a cut.
This was mainly due to the increase in oil and gas prices associated with the Iran conflict, which increased inflation risks. This creates a difficult environment for both policymakers and investors. In fixed income markets, UK government bonds have come under pressure at times; Yields have been rising as interest rate cut expectations faded and have partially recovered recently. Shorter-dated bonds now reflect a more uncertain path for policy rather than a simple easing cycle.
European Central Bank Interest rates are expected to remain constant today.
Bank related to Japan It turned things around overnight without changing lending interest rates. Bank of Canada I did it yesterday.
Last night, Federal Reserve The US left interest rates unchanged and warned that “the impact of developments in the Middle East on the US economy is uncertain.”
Agenda
-
07:00 GMT: UK workforce report
-
8.30 GMT: Riksbank interest rate decision
-
Noon GMT: Bank of England interest rate decision
-
13.15 GMT: European Central Bank interest rate decision
-
1.45m GMT: European Central Bank press conference
