The Bank of England held rates steady for a second meeting as inflation eased to 2.8%, though energy price caps threaten a rebound.
The Bank of England left its key interest rate unchanged at 3.75% on Thursday, matching economist forecasts. Seven of nine Monetary Policy Committee members backed the decision, citing a balance between persistent inflation and weak economic growth.
U.K. inflation held at 2.8% in May, cooler than expected, driven by rising fuel costs. However, a 13% increase in the regulated energy price cap this summer could reverse the decline, pushing costs to a two-year high. April GDP contracted by 0.1%, underscoring fragile economic activity.
Markets still anticipate a rate hike by year-end, despite recent progress in Iran-U.S. peace talks. The BOE’s April meeting also saw a unanimous hold, with traders pricing a 96% chance of no change ahead of this decision.