The Bank of England has kept its key interest rate on hold for the fifth time in 2026 after a bigger-than-expected drop in the inflation rate in June gave policymakers breathing space to assess the fallout from renewed fighting in Iran.
The bank’s monetary policy committee on Thursday voted 6-3 to keep the rate at 3.75 per cent, in line with the expectations of most economists.
Policymakers have kept the rate at that level since December after four rate cuts in 2025.
The split decision highlights growing tensions within central banks around the world about how to respond to stubbornly high inflation and concerns that the war in Iran will lead to another round of price increases.
The US Federal Reserve on Wednesday kept its key rate at a range of 3.5 per cent to 3.75 per cent, with chair Kevin Warsh saying the Fed “will not hesitate to act” to keep inflation under control.
Consumer price inflation in the UK slowed to 2.6 per cent in the 12 months through June from 2.8 per cent the previous month, according to the latest figures from the Office for National Statistics.
While the drop was bigger than economists expected, inflation remained above the bank’s two per cent target for a 21st month in a row.
Renewed attacks by the United States and Iran in the Middle East sent oil prices soaring in July due to concerns about the continued disruption of traffic in the Strait of Hormuz, through which a fifth of all crude oil and natural gas traded once passed in peacetime.
Brent crude, the benchmark for world oil prices, jumped to more than $US100 a barrel on July 23 from less than $US71 three weeks earlier as the ceasefire between the US and Iran broke down.
Brent crude traded for about $US92 a barrel on Thursday.
In Britain, economists are also closely watching the tax and spending policies of new Prime Minister Andy Burnham to see if his efforts to shield consumers from rising prices and spur economic growth are likely to add to inflation.
Australian Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national newswire and has been delivering accurate, reliable and fast news content to the media industry, government and corporate sector for 85 years. We keep Australia informed.
