LONDON (AP) – The Bank of England kept its key interest rate unchanged at 3.75% on Thursday as policymakers assess the economic impact of the financial crisis. iran war and the de facto closure by Tehran. Strait of Hormuz, One-fifth of the world’s oil passes through it. The decision was widely expected and mirrors those of other central banks facing rising prices as a result of the Middle East conflict. On Wednesday, us federal reserve system The next day, interest rates were left unchanged. bank of japan I did that too. of european central bank It is expected to keep interest rates unchanged later on Thursday.
Minutes from the Bank of England’s meeting showed that eight out of nine policymakers voted to keep interest rates on hold, with one choosing to raise rates by a quarter of a percentage point.
“We believe this is a logical place to be, given the economic situation and the unpredictability of events in the region,” Middle East Bank Governor Andrew Bailey said. “We will continue to closely monitor the situation and the impact on the UK economy. Whatever happens, our job is to ensure that inflation returns to our 2% target once the initial impact of the war on energy prices has passed.”
In an unusual development, the bank issued a range of forecasts in light of geopolitical uncertainty. The report said that in a worst-case scenario, in which oil and gas prices remain high for an extended period, UK inflation could rise to as much as 6.2% from the current 3.3%. We also considered some of the ways that things could play out in a worst-case scenario that could lead to multiple rate hikes and increased recession risk. Before the Iran war began on February 28, there were expectations in financial markets that the Bank of England would cut interest rates, given expectations that inflation would retreat towards its 2% target during the spring. Since then, the war has upended the Bank’s predictions and broader global economic forecasts. oil price costs are rising rapidly. Energy prices have soared again over the past few days as traders price in prices. rising expectations The Strait of Hormuz will remain closed for an extended period of time. Brent crude oil, the international standard, soared to more than $126 a barrel at one point on Thursday, its highest price since the aftermath of Russia’s full-scale invasion of Ukraine four years ago.
Bank of England policymakers are watching to see whether the apparent spike in inflation begins to spread through the economy, including through higher wages. It will also monitor how the oil price shock affects the economy and whether it will lead to a recession, and will try to curb price increases.
Luke Bartholomew, deputy chief economist at asset management firm Aberdeen, said he believed recession risks would limit the impact of a second round of inflation.
“However, if oil prices continue to rise, it is difficult to see how the central bank will avoid raising interest rates this year,” he said.
Policymakers will also be wary of further actions by Britain’s Labor government to limit the impact of inflation on households and businesses. Treasury Secretary Rachel Reeves, whose hopes for a living wage were dashed by the Middle East crisis, said she stood ready to provide support if needed.
“The wars in the Middle East are not our wars, but they are the wars we must respond to,” Reeves said.
