UK rates kept on hold as bank weighs Iran war impact
The Bank of England left its main interest rate unchanged at 3.75 percent on Thursday as policymakers assessed the economic impact of the Iran war and Tehran’s effective closure of the Strait of Hormuz, through which a fifth of the world’s crude oil passes.
Thursday’s decision was widely expected and mirrored the U.S. Federal Reserve’s decision to leave interest rates unchanged on Wednesday.
It was the same theme in Japan on Tuesday.
Meeting minutes showed eight of nine rate makers voted to keep interest rates steady, while one member favored a quarter-point increase.
“We think that’s a reasonable place to be, given the state of the economy and the unpredictability of events in the Middle East,” bank governor Andrew Bailey said.
“We will continue to monitor the situation and its impact on the UK economy very closely.
“Whatever happens, our task is to ensure that inflation returns to the two percent target after the initial impact of the war on energy prices has passed.”
Before the start of the Iran war on February 28, there was an expectation in the financial markets that the Bank of England would cut interest rates, as inflation was predicted to fall towards the 2 percent target.
The war has upended the bank’s forecasts and broader global economic forecasts, as oil prices and other costs have risen sharply.
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