LONDON, June 18 (Xinhua) -- The Bank of England (BoE) on Thursday left its benchmark interest rate unchanged at 3.75 percent, warning that the war in the Middle East has pushed up energy costs and increased uncertainty over Britain's inflation outlook.
The central bank said the conflict had disrupted energy transportation and supply, driving up fuel prices and household utility bills. Although prices have eased from their initial spike, the BoE said the future trajectory of energy costs remains difficult to predict.
Britain's inflation rate has fallen to 2.8 percent, but the BoE expects inflation to rise again as higher energy costs feed through to the broader economy. Businesses facing higher costs may raise prices to protect margins, while workers may seek higher wages as household expenses increase, it said.
The BoE said the extent of the impact would depend largely on how long energy prices remain elevated and whether the shock triggers broader price and wage pressures. It stressed that monetary policy cannot influence global energy prices, but can help prevent temporary price increases from becoming entrenched in inflation.
At the same time, the Bank noted that demand for workers remains subdued, which could ease pressure on employers to raise wages. Interest rates also remain higher than before the conflict began, helping to curb demand and limit the pass-through of higher energy costs to inflation.
British media reported that the BoE's decision reflects a cautious policy stance as policymakers seek to balance renewed inflationary pressures stemming from global energy markets against signs of a softening labour market, adding that the decision had been widely expected, with investors and analysts closely watching for signals on when the central bank might resume interest rate cuts.
The BoE said it would continue to monitor developments closely and ensure that inflation returns sustainably to its 2 percent target over the medium term. ■
