Lead

The Bank of England has kept UK interest rates on hold at 3.75%, as it warned that a further escalation in the Iran war could drive inflation above 4% next year, adding to cost of living pressures on households. The decision, taken by the Bank's monetary policy committee (MPC), comes amid volatile energy prices and renewed conflict in the Middle East.

Chancellor John Healey said the government is standing by to prevent the public from "being taken for a ride at the pump or the till" as the Iran war continues to hit prices. While he said there had been "no significant evidence of so-called price gouging" during the crisis, he used a weekend column to tell big retailers that ministers were "watching closely" for any signs of profiteering.

Coverage comparison

The Guardian's coverage of the decision consistently reports that the Bank of England held interest rates at 3.75%, with the MPC voting by six to three to keep the key base rate unchanged. The vote split is also reported as seven to two in one analysis of the expected decision, reflecting differing accounts of the committee's internal divisions.

All reports agree that the Bank warned of an "adverse scenario" in which a drawn-out war and oil prices remaining above $100 a barrel could drive UK inflation to a peak of 4.5% by the middle of 2027. The central forecast, based on oil falling back to about $71 a barrel, still expects inflation to peak at about 3.2% later this year.

The coverage also notes that UK inflation dropped by more than expected in June, and that the Bank sees signs the impact from the war could be contained given a sluggish growth outlook and rising unemployment. One report highlights that the UK had already lost the equivalent of £28bn in growth this year as a result of the Middle East conflict.

Key claims

  • The Bank of England's monetary policy committee voted to keep interest rates at 3.75%.
  • A further escalation in the Iran war could drive inflation above 4% next year.
  • Chancellor John Healey said the government is standing by to prevent price gouging.
  • No significant evidence of price gouging has been found during the crisis.
  • The Bank of England expects inflation to peak at 3.2% later this year.
  • The Bank's governor, Andrew Bailey, said the conflict in the Middle East continues to mean high and volatile energy prices.
  • Oil prices could return to above $100 a barrel, forcing the Bank of England to raise interest rates later this year.

Perspectives

Government

Chancellor John Healey emphasised the government's readiness to act against profiteering, saying ministers were watching retailers closely for any signs of price gouging, while acknowledging there was no significant evidence of it so far.

Bank of England

Governor Andrew Bailey said inflation had fallen faster than expected but warned that the Middle East conflict would cause inflation to rise again later this year. He stressed the Bank's job was to ensure any increase was temporary and that inflation returns to the 2% target.

City economists

Economists, including Sanjay Raja at Deutsche Bank, flagged upside risks to the interest rate outlook, with much dependent on the duration of the energy shock. A second energy wave could amplify uncertainty around the inflation path, they said, and could force the Bank to raise rates if oil prices exceed $100 a barrel.