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  "path": "/money/bank-of-england-interest-rates-iran-inflation-fears",
  "publishedAt": "2026-03-12T17:19:53.000Z",
  "site": "https://www.gbnews.com",
  "tags": [
    "Winston Churchill to be scrapped from banknotes as Bank of England panel labels decision 'overdue'",
    "UK inflation could surge above five per cent as US-Iran war drives energy prices higher",
    "Inflation target pushed back as US-Iran war poses 'risks' for interest rates and UK economy",
    "The GB News Editorial Charter"
  ],
  "textContent": "\n\n\n****The Bank of England is widely expected to keep interest rates at 3.75 per cent when policymakers meet next Thursday, March 19, as escalating tensions in the Middle East complicate the outlook for inflation.\n\nMembers of the central bank’s rate-setting committee will gather for the latest meeting of the Monetary Policy Committee (MPC) to determine whether borrowing costs should change.\n\n###\n\n\n\n\nJust two weeks ago, economists had widely anticipated a reduction in interest rates.\n\nSome forecasters predicted two cuts during 2026 as inflation continued to fall toward the central bank’s two per cent target.\n\n###\n\n\n\n\nTRENDING\n\nStories\n\nVideos\n\nYour Say\n\n###\n\n\n\n\nHowever, the outlook has shifted significantly following rising tensions in the Middle East that have disrupted global energy markets.\n\nSharp increases in oil and natural gas prices have forced analysts to reconsider their expectations for monetary policy.\n\nMarket pricing now suggests roughly even odds that borrowing costs could increase before the end of the year.\n\nThe shift represents a notable reversal from earlier expectations that policymakers would begin cutting interest rates in March before pausing until 2027.\n\nEnergy prices have risen sharply in recent weeks.\n\n###\n\n\n\n\n###\n\n\n\n\n###\n\n\n\n\nOil and gas prices are now estimated to be roughly 50 per cent higher than the assumptions used in the central bank’s most recent economic forecasts.\n\nSome economists now believe inflation could rise to between 3.5 and four per cent by December.\n\nSuch an outcome would represent a departure from the previously expected path toward the Bank’s two per cent inflation target.\n\nMotorists could face higher fuel costs in the near future.\n\nThomas Pugh, chief economist at RSM UK, said petrol prices could rise from around £1.33 per litre to almost £1.60 in the coming weeks.\n\nHousehold energy costs are also expected to remain elevated.\n\n### LATEST DEVELOPMENTS\n\n\n\n\n  * Winston Churchill to be scrapped from banknotes as Bank of England panel labels decision 'overdue'\n  * UK inflation could surge above five per cent as US-Iran war drives energy prices higher\n  * Inflation target pushed back as US-Iran war poses 'risks' for interest rates and UK economy\n\n\n\n###\n\n\n\n\n###\n\n\n\n\nEarlier expectations that bills might fall during the summer have largely disappeared following the surge in global energy prices.\n\nOfficials in Iran have warned that oil prices could climb beyond 200 dollars per barrel if the conflict disrupts global shipping routes or energy production.\n\nThe situation has created a difficult decision for policymakers.\n\nMichael Saunders, a former member of the MPC who now works at Oxford Economics, said central banks would normally look beyond temporary energy price shocks.\n\nInterest rate changes typically take between 12 and 18 months to influence the wider economy.\n\nHowever, Mr Saunders said recent experience suggests inflation expectations may not remain stable during prolonged price shocks.\n\n###\n\n\n\n\n###\n\n\n\n\nMr Saunders said: \"Recent experience has shown that inflation expectations are not as well anchored as central banks had hoped.\"\n\nHe warned that sustained increases in energy prices could lead to persistent inflation unless policymakers respond.\n\nThe Bank remains mindful of criticism that it reacted too slowly when energy prices surged after Russia's invasion of Ukraine.\n\nInternal divisions within the committee have already emerged.\n\nDuring February’s meeting, the decision to hold rates was narrowly passed by five votes to four.\n\nFour policymakers supported cutting borrowing costs at that time.\n\n###\n\n\n\n\n###\n\n\n\n\nDani Stoilova, an economist at BNP Paribas, expects the next vote to show stronger support for maintaining the current rate.\n\nMs Stoilova predicts a seven to two vote in favour of leaving interest rates unchanged.\n\nDespite the inflation concerns, some economists say the case for cutting rates has not entirely disappeared.\n\nThe UK labour market has shown signs of weakening in recent months.\n\nUnemployment has risen to 5.2 per cent, representing a five-year high compared with 3.8 per cent in 2022.\n\n###\n\n\n\n\nEconomic growth was also slowing before the conflict intensified.\n\nMatt Swannell, chief economic adviser at EY ITEM Club, said policymakers had only recently begun focusing more closely on labour market conditions.\n\nHe said: \"Just last month the focus of the MPC had shifted from inflation towards labour market weakness, with a March cut firmly on the table.\"\n\nRaising borrowing costs in an environment of weak growth and rising unemployment could increase the risk of stagflation.\n\nEconomists expect policymakers to wait before taking further action.\n\nMr Pugh said: \"Given uncertainty about the outlook for energy prices, inflation and the economy, the most sensible thing for the BoE to do now is wait for more clarity.\"\n\n###\n\n\n\n\n\n\n\n\n\n\n**Our Standards:The GB News Editorial Charter **",
  "title": "Bank of England interest rates expected to hold at 3.75% amid Iran conflict and inflation fears"
}