BoE Holds Rate at 3.75% as Inflation Forecast Raised to 3.5%
The Bank of England’s Monetary Policy Committee unanimously held the benchmark rate at 3.75% and warned that UK CPI inflation, at 3% in January, could rise to 3.5% by Q3. Wholesale gas prices are roughly 60% above pre-conflict levels due to disruptions through the Strait of Hormuz.
1. Rate Hold Decision
The Monetary Policy Committee voted unanimously to keep the Bank Rate at 3.75%, marking a rare consensus in recent years. The decision reflects uncertainty over the duration of Middle East conflict and its impact on global energy supply.
2. Inflation Outlook
CPI inflation, which stood at 3% in January, is projected to reach approximately 3.5% by the third quarter, nearly 1.5 percentage points above the 2% target. The committee noted that short-term volatility in energy prices makes the inflation path particularly uncertain.
3. Energy Price Surge
Wholesale gas prices are about 60% higher than before the Strait of Hormuz disruptions triggered by Iranian attacks on shipping. The MPC emphasized that while monetary policy cannot influence global energy costs, higher fuel prices will delay a sustainable return to target inflation.