Bank of England Expected to Keep Interest Rates Steady for the Rest of the Year

Most economists surveyed by Reuters say the Bank of England will keep its interest rates the same for the rest of the year. The bank's rate is currently set at 3.75%. This means borrowing money in the United Kingdom will not get cheaper or more expensive for now. Economists have held this view since a war involving the United States and Israel against Iran started in late February.

The UK's economy has stayed mostly strong since the war began. There is little sign that higher energy costs have hurt the broader economy. Because of this, the Bank of England has felt comfortable keeping rates where they are. Central banks often raise or lower interest rates to help control how fast prices rise.

Even so, inflation — the rate at which prices go up — is expected to have risen to 2.9% in July, up from 2.6% in June. The Bank of England has a goal, called a target, of keeping inflation at 2%. The bank itself expects inflation to rise above 3% later this year. That could mean everyday things like food and clothing will cost more for British families.

Out of 64 economists polled by Reuters, 56 of them — nearly 90% — believe the Bank of England will leave rates unchanged through the end of the year. Six economists thought rates would go up, and two thought they would go down. The poll was taken between August 13 and August 18. No economist expected any change at the bank's next meeting in September.

One reason prices are still high is that oil is expensive. Crude oil is selling at about $91 a barrel, which is roughly 25% more than before the war. A key shipping route called the Strait of Hormuz is still closed, making it harder to move Middle Eastern oil around the world. This keeps energy prices elevated.

Elizabeth Martins, a UK economist at HSBC bank, said a big jump in energy prices could change things. She also said the key question is whether high energy prices will push other prices up too. This is sometimes called a 'second-round effect,' where one price increase leads to more increases elsewhere. The Bank of England is watching this closely.

Recent jobs data showed that hiring has been slow and that worker pay is not growing too fast. Economist Bruna Skarica from Morgan Stanley said this means the jobs market is 'loose,' which makes it less likely that energy prices will cause a wider rise in prices. This gives the Bank of England more reason to hold rates steady. Most economists expect at least one rate cut by mid-2027, with the economy slowly growing stronger through 2028.