Bank of England expected to keep interest rates unchanged despite rising inflation

The Bank of England is expected to keep interest rates unchanged today [Macau time] even though inflation in the United Kingdom has risen to a five-month high as the fallout from the Iran war continues to ratchet up fuel prices.

Economists expect a majority of the nine-member Monetary Policy Committee will want to see more evidence that higher inflation is feeding through into underlying prices and wages and will therefore vote to keep the bank’s main rate unchanged at 3.75% for the sixth consecutive meeting — unlike the U.S. Federal Reserve, which raised rates Wednesday for the first time in three years.

David Rees, head of global economics at Schroders, is one of the many economists who think interest rates will be held because the economic backdrop, such as wages and the labor market, remains relatively soft.

“That should limit the extent to which imported price pressures become embedded in domestic wages and prices,” he said.

Like other central banks, the inflation outlook will be key for the Bank of England.

Many economists are forecasting inflation to rise from the current annual rate of 3.1%, which is already above the bank’s target of 2%, in coming months.