Bank of England holds rates at 3.75% as it warns inflation could top 4% early next year
AI Market Summary
The Bank of England held rates at 3.75% but shifted hawkishly, warning rates may need to rise if Middle East conflict sustains energy-driven inflation; it now expects inflation to exceed 4% next year. The MPC also paused gilt sales for six months and outlined a longer-run balance-sheet runoff plan, pushing yields lower and weakening sterling. The change in guidance raises UK rates volatility and tightens financial-condition uncertainty.
Impact level
● High
Affected assets
NCFXGBP2USD/USDT-0.20%
AI Insight · NCFXGBP2USD/USDTAI Insight
▼ Bearish
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The Bank of England kept its benchmark interest rate unchanged at 3.75% on Thursday but warned it could be forced to raise borrowing costs if the Iran war drags on. The central bank forecast UK inflation will rise above 4% early next year, well above its previous peak estimate of 3.2%. The Monetary Policy Committee voted 6-3 to hold rates, matching July’s split. Inflation has been below the 2% target in only three months over the past five years, complicating the chancellor’s efforts to project confidence ahead of the Oct. 28 budget.
