UK interest rates: Bank of England likely to keep rates unchanged; cautious stance amid Middle East tensions

The Bank of England is expected to keep interest rates unchanged on Thursday amid growing fears that the ongoing Israel-Iran conflict might drag in the US, pushing oil prices higher and worsening inflation in the UK.
The bank's nine-member Monetary Policy Committee is predicted to hold the main rate at 4.25%, a two-year low, while it watches how the situation in the Middle East turns over the upcoming days.
With UK inflation running at 3.4%, well above the Bank of England's 2% target, policymakers are expected to keep a close watch on oil prices, which have surged past $75 a barrel in recent days.
"The risk to energy prices has clearly intensified and moved up the agenda given developments in the Middle East," said Sandra Horsfield, economist at Investec told AP.
Policymakers had earlier expected inflation to stay elevated for a few more months before easing next year, but the recent oil prices surge could derail that forecast.
Adding to the uncertainty are global trade tensions, particularly around potential tariffs from US President Donald Trump. While the UK may escape the worst of those tariffs, the wider global economic outlook remains uncertain.
On Wednesday, US Federal Reserve had also kept rates unchanged, despite pressure from Trump to cut borrowing costs.
Since August last year, the Bank of England has trimmed rates every three months from a peak of 5.25%, suggesting the next cut may come in August — if economic conditions allow.
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