BOE holds rate, warns of hike if Iran war persists

The Bank of England kept its benchmark interest rate unchanged at 3.75 percent on Thursday, a widely anticipated decision, according to Business Recorder. Governor Andrew Bailey warned that a rate increase could become necessary if the Middle East conflict keeps energy prices elevated for longer. Three committee members wanted a 0.25 percentage point increase to four percent, while Bailey and five others backed no change.

The decision followed the Federal Reserve's move on Wednesday, its first US rate increase since 2023, aimed at containing rising inflation. Other central banks are also tightening, with the European Central Bank raising rates for the second time this year and the Bank of Japan expected to raise borrowing costs on Friday. UK inflation reached 3.1 percent in August, and the central bank now projects it rising to four percent by the first quarter of 2027.

Prime Minister Andy Burnham said on Wednesday that he would make tough calls on the economy before the budget update on October 28. Burnham and finance minister John Healey are under pressure to ease household living costs while keeping fiscal discipline tight.