The Bank of England is expected to keep its interest rate at 3.75% for a fourth consecutive meeting when policymakers announce their decision at 12:00 BST on Thursday. That would leave borrowing costs unchanged for mortgages, business lending and savings rates while inflation stays above target.
UK Inflation at 2.8%
2.8% was the UK inflation rate in the year to May, according to official figures published on Wednesday, with food price rises at a 17-month low. Transport costs rose at the fastest rate over the same period, while price growth in meat, dairy and vegetables eased.
3.75% is the benchmark rate analysts expect the Monetary Policy Committee to hold for a fourth straight meeting. At its April gathering, the committee signalled that rates could rise this year, a warning that now sits alongside softer inflation data and a calmer oil market.
Victoria Scholar on July bills
13% is the size of Ofgem's price-cap increase due in July, and Victoria Scholar of Interactive Investor said: "UK inflation is expected to increase over the summer after the next Ofgem price cap in July, when we will likely arrive at peak inflation, so for now [inflation] data looks like the calm before the storm." Millions of households still face that higher energy bill even as some pressure from fuel prices has eased.
Last week, the European Central Bank raised its interest rate for the first time in almost three years, saying the conflict was generating inflation pressures. Donald Trump said a peace deal with Iran was signed on Wednesday, and the reopening of the Strait of Hormuz should follow; the waterway normally carries a fifth of the world's oil and gas supplies, and oil prices have fallen close to their lowest since the conflict began.
If the Bank of England does hold at 3.75%, the decision would reflect a central bank trying to balance softer price data against a July jump in regulated energy bills. For households and borrowers, the practical question is whether mortgage and lending costs stay where they are now, or whether the committee resumes tightening later in the year.
