Bank of England keeps key rate at 3.75% for the fifth time this year

LONDON (AP) — The Bank of England kept its key interest rate on hold for the fifth time this year on Thursday after a bigger-than-expected drop in the inflation rate last month gave policymakers breathing space to assess the fallout from renewed fighting in Iran.

The bank’s monetary policy committee voted 6-3 to keep the rate at 3.75%, in line with the expectations of most economists. Policymakers have kept the rate at that level since December after four rate cuts in 2025.

The split decision highlights growing tensions within central banks around the world about how to respond to stubbornly high inflation and concerns that the war in Iran will lead to another round of price increases. The U.S. Federal Reserve on Wednesday kept its key rate at a range of 3.5% to 3.75%, with Chairman Kevin Warsh saying the Fed “will not hesitate to act” to keep inflation under control.

Consumer price inflation in the U.K. slowed to 2.6% in the 12 months through June from 2.8% the previous month, according to the latest figures from the Office for National Statistics. While the drop was bigger than economists expected, inflation remained above the bank’s 2% target for a 21st consecutive month.

Renewed attacks by the United States and Iran in the Middle East sent oil prices soaring this month due to concerns about the continued disruption of traffic in the Strait of Hormuz, through which a fifth of all crude oil and natural gas traded once passed in peacetime

Brent crude, the benchmark for world oil prices, jumped to more than $100 a barrel on July 23 from less than $71 three weeks earlier as the ceasefire between the U.S. and Iran broke down. Brent crude traded for about $92 a barrel on Thursday.

In Britain, economists are also closely watching the tax and spending policies of new Prime Minister Andy Burnham to see if his efforts to shield consumers from rising prices and spur economic growth are likely to add to inflation.