{"id":354765,"date":"2026-03-19T18:34:21","date_gmt":"2026-03-19T18:34:21","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/354765\/"},"modified":"2026-03-19T18:34:21","modified_gmt":"2026-03-19T18:34:21","slug":"bank-of-england-holds-interest-rates-at-3-75-and-signals-rise-is-possible-within-months-interest-rates","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/354765\/","title":{"rendered":"Bank of England holds interest rates at 3.75% and signals rise is possible within months | Interest rates"},"content":{"rendered":"

The Bank of England<\/a> has kept interest rates on hold and signalled it could be forced to increase borrowing costs in the coming months as the US-Israel war on Iran threatens to drive inflation in the UK above 3%.<\/p>\n

The Bank\u2019s rate-setting monetary policy committee (MPC) voted unanimously to keep its base rate at 3.75% amid growing concern over the surge in energy prices<\/a> triggered by the conflict.<\/p>\n

The pound strengthened against the US dollar after the decision, while UK government borrowing costs rose and the FTSE 100 fell as City traders bet that the Bank would be forced to raise interest rates twice this year.<\/p>\n

In a development that would add to the pressure on household finances already battered by a cost of living crisis, financial markets anticipate a quarter-point increase from as early as June, followed by a further rise to 4.25%.<\/p>\n

Against an increasingly volatile backdrop in global markets, the Bank said the \u201cnew shock\u201d to the economy would lead to higher than previously expected inflation in the short term.<\/p>\n

Andrew Bailey, the Bank\u2019s governor, said: \u201cWar in the Middle East has pushed up global energy prices. You can already see that at the petrol pump and if it lasts it will feed into higher household energy bills later in the year.<\/p>\n

\u201cThe best way to tackle this is at the source by reopening energy supply lines. We have held interest rates at 3.75% as we assess how events unfold. Whatever happens, our job is to make sure inflation gets back to its 2% target.\u201d<\/p>\n

The Bank said it stood \u201cready to act as necessary\u201d to achieve this.<\/p>\n

In a suggestion that financial markets were getting ahead of themselves in predicting multiple rises, Bailey later told broadcasters: \u201cI would caution against reaching any strong conclusions about us raising interest rates \u2026 Today we\u2019ve given a very clear message. The right place to be is on hold.\u201d<\/p>\n

Before Thursday, financial markets had given an almost 100% chance of a hold decision, reversing expectations before the outbreak of the war of a cut in rates amid cooling inflation, a slowdown in the jobs market and sluggish economic activity.<\/p>\n

Official figures published earlier on Thursday showed UK wage growth<\/a> slowed sharply in the three months to January, while unemployment remained at 5.2%, the highest point in five years.<\/p>\n

Headline inflation had been expected to fall from 3% now to about 2% from April, partly owing to measures announced by the chancellor, Rachel Reeves, in her autumn budget to cut household energy bills.<\/p>\n

The Bank said the rate would probably rise to about 3.5% in March and stick at more than a percentage point above its 2% target throughout 2026.<\/p>\n

Daisy Cooper, the Liberal Democrats\u2019 Treasury spokesperson, said: \u201cPeople across the country will be tightening their belts as \u2018Trumpflation\u2019 forces the Bank of England into a corner. Today, we\u2019re getting more of the same damaging rates that have forced people to shell out for ever higher mortgages.<\/p>\n

\u201c[Donald] Trump and his cheerleaders [Kemi] Badenoch and [Nigel] Farage are to blame for the spiralling costs people will be seeing on their bills.\u201d<\/p>\n

Some members of the MPC suggested they would have voted for a reduction in borrowing costs before the outbreak of the war, including Sarah Breeden and Dave Ramsden, two of the Bank\u2019s deputy governors.<\/p>\n

However, others said borrowing costs might need to rise in response to a sustained inflation shock, including the economist Swati Dhingra, who had previously been one of the most consistent advocates for rate cuts.<\/p>\n

Megan Greene, an external member of the committee, said in the minutes of the MPC decision that households and businesses could be more sensitive to rising inflation given successive shocks to the economy in recent years. \u201cInflation has been above target for the best part of five years,\u201d she said.<\/p>\n

Analysts said higher borrowing costs would add to the headwinds facing the UK economy after a weak start to the year while raising the stakes for the government as Reeves explores options for an energy support package to help vulnerable households.<\/p>\n

Kathleen Brooks, a research director at the trading platform XTB, said rates on a five-year fixed mortgage in the UK were hitting the highest levels since early 2025. \u201c[This] is another nail in the coffin for the Labour government\u2019s growth strategy, which hinged on lower interest rates,\u201d she said.<\/p>\n","protected":false},"excerpt":{"rendered":"The Bank of England has kept interest rates on hold and signalled it could be forced to increase…\n","protected":false},"author":2,"featured_media":354766,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,113,61,60],"class_list":["post-354765","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-ie","tag-ireland"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/354765","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=354765"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/354765\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/354766"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=354765"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=354765"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=354765"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}