Bank of England holds rates at 3.75% amid rising geopolitical tensions – LCP

The MPC’s decision to keep rates at 3.75% highlights the fine line the Bank of England continues to tread. On one hand, there’s been some relief from domestic inflationary pressures, with CPI falling to 2.6% in June on the back of cooling wage growth and food prices.

However, the collapse of the US-Iran ceasefire and subsequent surge in global oil and European gas prices pose a clear threat to autumn’s potential inflation trajectory. The Bank is therefore adopting a wait-and-see approach, maintaining tight financial conditions while retaining the option of a rate rise as early as September should energy-related pressures prove persistent.

While the UK economy has shown some resilience in recent months, the longer energy supply routes remain squeezed, the harder it will be for the MPC to avoid tightening policy. Institutional investors and trustees should remain mindful of potential market volatility, as major monetary decisions over the coming months will remain sensitive to daily geopolitical developments and energy market movements.