UNIPA NEWS(London)18 June-The Bank of England has kept its benchmark interest rate unchanged at 3.75%, despite concerns that inflationary pressures could persist due to recent volatility in global energy markets linked to the Iran conflict.
At its latest meeting, seven members of the nine-member Monetary Policy Committee (MPC) voted to maintain the current rate, while two members, Megan Greene and Huw Pill, supported an increase to 4%, citing uncertainty over inflation and energy price movements.
Bank of England Governor Andrew Bailey said falling oil prices in recent days were encouraging but remained above levels recorded before the conflict. He noted that higher energy costs over recent months were already feeding inflationary pressures into the economy.
The Bank’s decision comes after US President Donald Trump announced a temporary agreement with Iran guaranteeing free passage through the Strait of Hormuz for 60 days. The development has contributed to a decline in oil prices, bringing them closer to pre-conflict levels.
Reflecting the recent easing in energy costs, the MPC revised its inflation outlook. The Bank now expects Consumer Prices Index (CPI) inflation to remain just below 3% over the next three months before rising slightly above 3.25% by the end of 2026.
The updated forecast is lower than projections published in April, when the Bank anticipated inflation could peak at around 3.6% under its most favourable scenario. Under a more severe scenario involving sustained high oil prices, inflation had previously been projected to reach as high as 6.2%.
Despite the improved outlook, policymakers said the direct impact of earlier energy price increases had already contributed to higher inflation, particularly through rising fuel costs.
Official data released recently showed CPI inflation remained unchanged at 2.8% in May, staying above the Bank of England’s 2% target.
While the majority of MPC members favoured holding rates steady, Greene and Pill argued that persistent uncertainty surrounding inflation and energy markets justified a precautionary rate increase.
