Bank of England holds main interest rate at 3.75% as inflation pressures eases

LONDON (AP) — The Bank of England has held its main interest rate at 3.7% as the inflation pressures on the British economy have become more benign after the U.S. and Iran signed a dea l to sign deal to end their war.

Thursday’s decision was widely anticipated after figures showed inflation did not rise as had been expected in May, holding steady instead at 2.8%.

Though that remains above the bank’s target of 2%, it raised hopes that the upward pressure on prices emanating from the spike in oil and gas prices after the start of the Iran war on Feb. 28 may have been less than anticipated.

Economists think rate-setters will opt against hiking rates over coming months, but only if the recent fall in energy prices is sustained.

Andrew Bailey, the bank’s governor, said the recent fall in oil prices has been “encouraging” while noting they are still higher than before the war.

“Whatever happens in the future, the higher energy prices of the past four months mean there’s already some inflationary pressure in the pipeline,” he said. “The Bank’s job is to make sure that doesn’t turn into sustained inflation above our 2% target.”

Two of the nine members of the Monetary Policy Committee remain concerned enough about those pipeline pressures that they voted for a quarter-point increase.