Three out of nine members vote to increase rate to 4%published at 12:09 BST
12:09 BST
Dearbail Jordan
At the Bank of England
The Bank of England examined a range of scenarios of what might happen to inflation and the economy depending on the Middle East conflict.
Inflation was previously expected to reach 3.5% this year. In a worst-case scenario, where oil prices reach $100 a barrel, the Bank now projects that inflation could reach 3.2% in 2026.
In a scenario where oil prices are around $76 before falling back to $71, inflation could reach 3%. While better than previously forecast, that remains above the Bank of England’s 2% target.
The UK economy is expected to grow by 1.1% this year, ahead of forecasts in April.
While the Bank’s rate-setting committee voted to hold borrowing costs, three of its nine members wanted to increase the rate to 4%.
Megan Greene, one of the three who voted for a rise, said that while there was uncertainty because of the Iran war, other “risks loom” over inflation.
These include a second choke point for global energy supplies in the Red Sea – Houthi rebels in Yemen recently attacked oil tankers passing through the region. She also warned about El Niño and a slowdown in AI-related hardware should supply constraints continue.