Only the Middle East crisis is preventing a drop in UK interest rates

📰 source: theguardian_business · 💼 business

the bank of england held interest rates at 3.75% on thursday, with the middle east crisis being the main obstacle to a cut. underlying inflation pressures are almost entirely absent in the domestic economy, and prices are stable. without the war, inflation would be at the 2% target.

the monetary policy committee was split: three members voted to raise rates, arguing that once prices rise again, workers and firms will react, embedding inflationary pressures. the majority focused on the labor market, noting rising unemployment and falling vacancies. the bank's forecasters expect inflation to peak at 3.2% next spring, but it could reach 4.1% if the war persists and brent crude stays above $100 a barrel. the national institute of economic and social research said the uk has lost £28bn in growth this year due to the conflict. so far, there are few signs of second-round effects from higher energy costs, but the risk remains.

why it matters: middle east conflict is the main barrier to rate cuts, threatening higher inflation and economic slowdown in the uk.

source: theguardian_business
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