"Conflict in the Middle East has significantly shifted the outlook for inflation. Absent this shock, the underlying disinflation process had continued broadly as I expected, and, consistent with my vote in February, I would have expected to vote for a cut again in March. But the conflict will have a significant, though at this point highly uncertain, impact on inflation."
"Monetary policy cannot influence global energy and commodity prices, but it can, and it must aim to ensure that the economic adjustment to them occurs in a way that achieves the two per cent target sustainably. How that adjustment occurs is hugely uncertain, with risks to both sides, and I vote to hold at this meeting."
The Bank of England's Monetary Policy Committee unanimously decided to hold the base interest rate at 3.75%, maintaining borrowing costs for households and businesses. The central bank significantly revised its inflation forecast upward to 3.5% for the third quarter of 2026, compared to the previous 2% estimate. This revision stems from the Middle East conflict, which has created an inflationary shock in energy markets and altered the economic outlook. Consequently, market expectations have shifted, with interest rate cuts in 2026 now considered unlikely, reversing earlier predictions of monetary easing. The Committee will reassess the situation in April as more information emerges about the shock's scale, duration, and potential secondary effects on inflation.
Read at London Business News | Londonlovesbusiness.com
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