The Bank of England held rates at 3.75% amid a 6-3 split vote, as rising energy prices push UK inflation to 3.1% and complicate the outlook for future monetary policy.
Middle East conflict is keeping oil prices elevated, feeding directly into UK inflation.
Brent crude prices remain high due to geopolitical tensions, pressuring UK energy costs and inflation.
Sterling weakened after the Bank of England held rates at 3.75% with adjustments to quantitative tightening.
Natural gas prices are elevated, contributing to the Bank of England's concern about persistent inflation.
The Bank of England maintained the Bank Rate at 3.75% in a 6-3 vote, as inflation rose to 3.1% driven by elevated energy costs. While the economy shows unexpected resilience with 0.4% GDP growth in July, policymakers are increasingly divided over the need for further tightening to prevent energy-driven price pressures from becoming embedded in the broader economy.
The Bank is concerned that elevated energy prices, driven by Middle East geopolitical tensions, will feed into broader wage and price inflation, necessitating a tighter monetary policy stance.