The Bank of England is expected to keep interest rates on hold this Thursday, as officials grapple with a complex backdrop of heightened geopolitical risks, persistent inflation, potential trade disruptions from proposed US tariffs, and mixed domestic economic data. Although headline inflation in the UK eased to 3.4% in May, it remains significantly above the BoE’s 2% target, and may face renewed upward pressure if the Israel-Iran conflict leads to higher oil prices. Still, core inflation came in slightly below expectations at 3.5%, and services inflation—a key metric closely watched by the Bank—fell sharply to 4.7%, aligning with forecasts. The BoE has already cut interest rates four times over the past year, following aggressive tightening in 2022 and 2023 to combat soaring inflation. Markets are currently pricing in two additional 25 basis point cuts before the end of the year.
