The Bank of England (BoE) has unanimously voted to keep its main interest rate at 3.75 %, citing growing inflation risks driven by energy price pressures associated with the ongoing conflict in the Middle East, particularly the war involving Iran.
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In its March 2026 decision, the BoE’s Monetary Policy Committee highlighted that rising petrol and household energy costs pushed higher by global geopolitical uncertainty pose a material risk to inflation over the coming months. While the committee held rates at their current level, several policymakers indicated that future rate increases remain possible if inflation expectations strengthen further.
The decision came as consumer prices in the UK risk rising above target levels again amid the energy price shock, reversing earlier expectations of rate cuts. Market reactions showed increased expectations of tightening rather than easing monetary policy, with bond yields climbing on the announcement.
The central bank said it will continue to monitor economic data closely and adjust policy as needed to achieve its inflation target. With global energy markets highly sensitive to geopolitical developments, the BoE’s cautious stance underscores the broader economic impact of the Iran war on inflation and monetary policy.
The Bank of England held rates steady in a unanimous decision, but signaled readiness to hike rates if energy prices rise further due to the uncertainty from the Iran war pic.twitter.com/WeLPkS8eOL
— Reuters (@Reuters) March 19, 2026
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