Bank of England holds interest rates at 3.75% amid peace returning to Middle East
London, June 18
,: Bank of England maintained status quo and held the interest rates at 3.75 per cent underlining the impact of falling global energy prices since its previous meeting.
The Monetary Policy Committee (MPC) voted 7-2 to maintain Bank Rate at 3.75 per cent with two members in favour of raising rates by 25 basis points to 4 per cent. The central bank said it is committed to price stability and achieving a target of 2 per cent inflation.
The hold comes amid a peace agreement that was signed between the US and Iran. Both the countries decided to enter a 60-day period of no hostilities and immediate opening of Strait of Hormuz. Oil prices took a breather and have fallen since although still above the pre-conflict level.
The US Federal Reserve, on Wednesday, held the Federal Funds Rate at 3.5-3.75 per cent with a hawkish outlook spooking markets. Kevin Warsh, who chaired his maiden Fed policy, spoke multiple times about price stability and the dot plot by Fed members indicated that one rate hike is imminent this year.
Earlier, Japan and European Central Bank (ECB) raised interest rates. Japan raised rates to 1 per cent taking them to a 31-year high. Inflation fear has rippled through major economies as they balance rising prices and stalling growth.
The Bank of England said that even though inflation has fallen to 2.8 per cent since the previous meeting, it is expected to rise later in the year as effects of higher energy prices continue to pass through.
"The risk of material second-round effects in price and wage-setting, against which policy needs to lean, is greater the longer higher energy prices persist," Bank of England said.
The Bank said that signs of weakening economy could contain inflationary pressures. The MPC said it will closely track the developments in Middle East and see how the impact propagates through economy.
— ANI
Reader Comments
I'm surprised they didn't cut rates, given the peace deal and falling energy prices. But I guess the Bank is being cautious about second-round effects. The hawkish Fed outlook is scary though—one more hike this year? That could hit emerging markets like India hard. 😬
The BOE's logic makes sense—inflation at 2.8% is still above target, and with energy prices still above pre-conflict levels, they can't risk premature cuts. However, I wish they'd consider the impact on Indian students and businesses in UK who are already struggling with high costs. The RBI should watch this closely. 🇮🇳
Mixed signals everywhere—Japan raising to 1% (31-year high!), ECB hiking, Fed hawkish, BOE holding. It's like central banks are all dancing to different tunes. The peace in Middle East is a welcome relief, but can we really trust it to last 60 days? History says no. 😅
The BOE's decision is pragmatic, but I'm more worried about India's exposure. Our RBI governor should take note: global uncertainty means we need to be extra careful with our own rate decisions. Also, why are the 'experts' always talking about second-round effects without addressing the first-round pain for common people? 🤔
The real story here is the US-Iran peace deal—it's a game-changer for global oil supply. Strait of Hormuz reopening means prices could stabilize further. But the BOE's hawkish caution is understandable; they don't want to blink first. For us in India
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