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\t\tThe Bank of England faces a “judgment call” on interest rates.\t<\/p>\n\t\t\tWednesday 15 April 2026 10:06 am\n\t\t\t<\/p>\n
\t\tThe Bank of England faces a “judgment call” on interest rates.\t<\/p>\n
The Bank of England could cut interest rates this year if the war in Iran ends and the Strait of Hormuz opens up within weeks, an economist at a City broker has said.\u00a0\u00a0<\/p>\n
Peel Hunt\u2019s chief economist Kallum Pickering\u2019s current assumption is that the Bank makes two interest rate cuts at the end of this year on the basis that a resolution is found for trading routes in the Middle East.\u00a0<\/p>\n
Pickering said he found market pricing<\/a> suggesting there would be one rate hike \u201codd\u201d even as there was \u201cincreasing optimism\u201d of a peace deal being struck to open up the Strait, where a hold-up in trade has heightened the risk of fuel shortages across the world.\u00a0<\/p>\n He also suggested traders had begun to factor in a \u201cmore balanced view\u201d of inflation and growth<\/a> risks by changing expectations that there would be one hike instead of three.\u00a0<\/p>\n Pickering, who is a member of City AM\u2018s Shadow Monetary Policy Committee, said: \u201cI still find market pricing odd. One hike \u2013 what is the point in that? Chances are, this is among the least likely paths.\u201d<\/p>\n<\/p>\n However, the Peel Hunt deputy head of research said there were \u201ctwo prevailing views\u201d that could leave the Monetary Policy Committee (MPC) with a dilemma on monetary policy.\u00a0<\/p>\n While an opening up of the Strait of Hormuz may be possible as a result of continued negotiations between Trump officials and Iranian leaders, he suggested a protracted conflict could force rate-setters to \u201ctake drastic action\u201d in order to prevent a surge in inflation.<\/p>\n \u201cIn that scenario, we could not rule out significant rate hikes.\u201d<\/p>\n City giants have taken contrasting views on the path of interest rates over the upcoming year. JP Morgan analysts believe that there will be one hike this year in June following a previous prediction of two hikes.\u00a0<\/p>\n \u2018Judgment call\u2019 on Trump-Iran negotiations<\/p>\n MPC members have largely avoided<\/a> making clear pronouncements over their thinking on the economic effects of the war.\u00a0<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tBank of England chief economist: Interest rates can \u2018contain\u2019 inflation<\/a><\/p>\n External member Megan Greene told an event in Washington on Tuesday that the Bank would have to make a \u201cjudgment call\u201d as it would be too late to wait for \u201cdefinitive data\u201d.\u00a0<\/p>\n She said there were both downside risks to growth, which could weaken demand in the UK economy, as well as upside risks to people\u2019s expectations, which could push wage growth higher and lead to a spike in inflation.\u00a0<\/p>\n President Trump has suggested that talks between the US and Iran could take place over the next day, after the US implemented a blockade on Iranian ports.\u00a0<\/p>\n Vice-president JD Vance is expected to lead another round of talks with Iranian officials, according to CNN.\u00a0<\/p>\n Both US and Iranian officials, including Trump himself, have mooted the possibility of imposing a toll on ships passing through the Strait, but Gulf countries and European allies have signalled their opposition to the new tax.\u00a0<\/p>\n Markets<\/a> have remained wary of the status of negotiations, with the Brent crude oil price rising slightly since the ceasefire lasting a fortnight was first announced last week.\u00a0<\/p>\n \u2018Pressure\u2019 for interest rate hike<\/p>\n Thomas Pugh, the chief economist at the accountancy RSM, has said that there is \u201cpressure\u201d on the Bank of England to hike interest rates as inflation has been higher in the UK recently than elsewhere, making the economy more vulnerable to a wage-price spiral.\u00a0<\/p>\n