FX.co ★ Bank of England Poised to Hold Rates

The Bank of England is likely to maintain its current interest rates this Thursday, as it navigates a challenging environment marked by increased geopolitical risks, persistent inflation, potential trade disruptions due to proposed US tariffs, and mixed signals from domestic economic data. While the UK’s headline inflation dropped to 3.4% in May, it still considerably surpasses the Bank of England's 2% target and might face upward pressure again if tensions between Israel and Iran escalate, driving oil prices higher. Despite this, core inflation was slightly below expectations at 3.5%, and services inflation—a vital indicator closely monitored by the Bank—plummeted to 4.7%, which was in line with forecasts. The Bank of England has already slashed interest rates four times over the past year, following a period of aggressive rate hikes in 2022 and 2023 to counteract soaring inflation. Currently, markets are anticipating two more 25 basis point rate cuts before the year concludes.