Bank of England Poised to Hold Rates Steady as Oil Prices Hit Iran War Lows

Introduction: Bank of England Interest Rate Decision Today

Good morning, and welcome to our rolling coverage of business, financial markets and the global economy.

UK households and businesses may be spared a rise in borrowing costs today, as the British economy struggles under the strain of the Iran war.

The Bank of England is widely expected to keep interest rates unchanged at 3.75% at noon today, following its latest monetary policy committee meeting.

Policymakers at the BoE will attempt to balance the challenge of containing imported inflation from the Middle East conflict while avoiding further strain on firms and consumers hit by rising energy costs.

With the economy contracting slightly in April and inflation coming in lower than forecast in May (as we learned yesterday), a rate hike appears unnecessary. City of London money markets indicate a 98% probability that rates will be held steady, with just a 2% chance of an increase.

Tomasz Wieladek, chief European macro economist at investment management firm T. Rowe Price, argues the Bank may not need to tighten monetary policy at all in the coming months.

Monetary policy in the UK appears to be finally working. A prolonged period of restrictive policy has, to a degree, weakened inflation dynamics.

Given the good news on inflation and the recent decline in oil prices, the MPC will likely conclude that no more hikes are necessary to stabilise inflation in the UK.

The Agenda

• 7am BST: UK labour market data

• Noon BST: Bank of England interest rate decision

• 1.30pm BST: US initial jobless claims

• 1.30pm BST: Philadelphia Fed Manufacturing Index