FX.co ★ BoE Seen Holding Rates at 3.75% as Inflation Risks Rise

The BoE is widely expected to leave interest rates unchanged at 3.75%, as policymakers weigh rising inflation risks stemming from the conflict in the Middle East. The sharp increase in oil and gas prices has clouded the outlook, pushing inflation expectations higher and forcing markets to abandon earlier bets on a near-term rate cut. Before geopolitical tensions escalated, a reduction to 3.50% had been viewed as highly likely, but that confidence has faded as energy prices climbed above $100 per barrel and uncertainty over the duration of the conflict persists. In this context, the Monetary Policy Committee is expected to strike a cautious tone, potentially revising its forward guidance to stress data dependence rather than hinting at imminent easing. Investors will scrutinise policymakers’ remarks for indications of how persistent they believe inflationary pressures will be. Although most economists still anticipate rate cuts later in the year, both the timing and the scale of any easing remain highly uncertain.