Bank of England holds rates at 3.75% but signals potential increases if geopolitical risks trigger second-round inflation effects.
Bank of England Governor Andrew Bailey indicated the central bank may raise interest rates if the Mideast conflict leads to persistent second-round inflation effects. The BoE held its benchmark rate at 3.75% in a 6-3 vote split during its July meeting, citing tentative evidence of such risks.
While current inflation data shows no immediate signs of second-round effects, Bailey emphasized the need for vigilance. Market pricing reflects risk premia rather than central expectations, with the rate curve described as reasonably positioned. Core inflation, excluding volatile food and fuel, remains a key focus for policymakers.
The BoE’s stance contrasts with recent decisions by other major central banks, as it balances inflation concerns against geopolitical uncertainties. No immediate market reaction was specified in the remarks.