The Bank of England has warned that interest rates are likely to rise if the war in Iran continues, with inflation now on course to reach 4 per cent. Its nine-member monetary policy committee voted 6 to 3 yesterday to leave borrowing costs at 3.75 per cent, the sixth hold in a row.
The decision was expected by markets and the pound traded flat against the dollar after the announcement.
The Bank expects inflation to rise to more than double its 2 per cent target in the early months of next year, because of the surge in global oil and gas prices since the Middle East conflict began more than six months ago. More than half of the overshoot is down to the war in Iran, the committee said.
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