Bank of England leaves rates on hold

19th Mar 2026 07:01

(Sharecast News) - The Bank of England left interest rates on hold on Thursday, as soaring energy prices continued to climb in response to war in the Middle East.

The rate-setting Monetary Policy Committee voted unanimously to leave the cost of borrowing at 3.75%, and said it "stands ready" to tackle any spike in inflation.

Up until the US attacked Iran at the start of the month, leading to the outbreak of widespread hostilities across the region, most analysts had been expecting rates to be trimmed at the March meeting. But the ensuing surge in energy prices - benchmark Brent crude is currently trading above $110 a barrel - has reignited inflation fears.

The MPC said it now expected the consumer price index to be higher in the near term "as a result of the new shock to the economy", with inflation reaching close to 3.5% in March. That is almost half a percentage higher than forecast in February.

In minutes accompanying the decision, it continued: "Conflict in the Middle East has caused a significant increase in global energy and other commodity prices, which will affect households' fuel and utility prices and have indirect effects via businesses' costs.

"Prior to this, there had been continued disinflation in domestic prices and wages."

Inflation currently stands at 3%, well off the peaks seen in the wake of Russia's invasion of Ukraine but still above target.

The bank also flagged the possibility of rate rises going forward, noting: "The Committee will continue to monitor closely the situation in the Middle East and its impact on global energy supply and energy prices. It stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term."

In particular, it noted that a "larger or more protracted shock" would require "a more restrictive policy stance".

Susannah Streeter, chief investment strategist at Wealth Club, said: "Interest rate policy is a blunt tool. This is an imported inflation crisis, and keeping rates higher to try and dampen domestic demand will hurt the whole economy. Only a resolution to the conflict will tackle the root cause."

Neil Wilson, investor content strategist at Saxo, said: "The dilemma for the Bank of England is either to worry more about the hit to growth, and lean dovish, or worry about the risk of persistent price pressures - and lean hawkish.

"For now, the prudent course is for the bank to remain on hold until the outlook becomes clearer."