Bank set to hold rates despite Middle East war

The Bank of England is tipped to hold interest rates again despite fresh uncertainty in the Middle East.

Economists expect a majority of the Bank’s rate-setting committee to keep the base interest rate at 3.75 per cent in spite of attacks in the region and US threats reigniting concerns over inflation.

A number of economists, including experts at Oxford Economics and Nomura, have predicted another seven-to-two vote in favour of holding the current rate.

The latest meeting of the Monetary Policy Committee, set for Thursday, July 30, will also see it unveil fresh economic forecasts amid a backdrop of easing inflation in recent months.

The Office for National Statistics last week revealed UK consumer price index inflation eased back to a 15-month low in June, at 2.6 per cent.

The recent decline will have provided some relief to the Monetary Policy Committee, which uses interest rates as a tool to control inflation.

However, inflation is now widely expected to swing back higher and further away from the Bank’s two per cent inflation target.

The Bank has previously predicted inflation will rise back to 3.25 per cent later this year as higher energy costs feed into household bills from July.

Thomas Pugh, chief economist at RSM UK, said he believes oil prices will “largely” steer the path of interest rates for the next year.

He added: “If they remain close to $100 per barrel over the summer, a September rate hike would move firmly onto the table, with another in the winter likely.”

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