BoE Seen Holding Rates at 3.75% as Inflation Risks Rise

2026-03-19 08:05 By Agna Gabriel 1 min. read

The BoE is expected to keep interest rates unchanged at 3.75%, as policymakers assess rising inflation risks linked to the Middle East conflict.

The sharp increase in oil and gas prices has complicated the outlook, pushing inflation expectations higher and prompting markets to abandon earlier bets on a near-term rate cut.

Prior to the escalation in geopolitical tensions, a reduction to 3.50% had been seen as highly likely, but that conviction has faded as energy prices climbed above $100 per barrel and uncertainty over the duration of the conflict persists.

The Monetary Policy Committee is therefore expected to adopt a cautious tone, potentially adjusting its forward guidance to emphasise data dependency rather than signalling imminent easing.

Investors will closely scrutinise policymakers’ comments for clues on how persistent they expect inflationary pressures to be.

While most economists still expect rate cuts later in the year, the timing and extent remain highly uncertain.



News Stream
BoE Seen Holding Rates at 3.75% as Inflation Risks Rise
The BoE is expected to keep interest rates unchanged at 3.75%, as policymakers assess rising inflation risks linked to the Middle East conflict. The sharp increase in oil and gas prices has complicated the outlook, pushing inflation expectations higher and prompting markets to abandon earlier bets on a near-term rate cut. Prior to the escalation in geopolitical tensions, a reduction to 3.50% had been seen as highly likely, but that conviction has faded as energy prices climbed above $100 per barrel and uncertainty over the duration of the conflict persists. The Monetary Policy Committee is therefore expected to adopt a cautious tone, potentially adjusting its forward guidance to emphasise data dependency rather than signalling imminent easing. Investors will closely scrutinise policymakers’ comments for clues on how persistent they expect inflationary pressures to be. While most economists still expect rate cuts later in the year, the timing and extent remain highly uncertain.
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Bank of England to Keep Rates Steady
The Bank of England is expected to keep interest rates unchanged at 3.75% on Thursday, as policymakers wait for clearer evidence that inflation is under control despite growing concern about the labor market. Markets see less than a 1% chance of a rate cut and most economists expect a 7 to 2 vote to hold, with only Alan Taylor and Swati Dhingra likely to support a reduction. Inflation remains elevated at 3.4% but is forecast to fall to the 2% target in the second quarter, keeping hawkish members cautious. At the same time, unemployment has risen to 5.1% and redundancies have increased, raising concerns about economic weakness. Recent data has been mixed, with stronger GDP growth, solid retail sales and improving business activity offset by labor market deterioration. Governor Andrew Bailey is expected to back a hold while signalling further gradual easing ahead, with markets pricing about a 70% chance of the next rate cut in April.
2026-02-05