Bank of England keeps rates on hold at 3.75% as Iran war shakes outlook

the bank of england held rates at 3.75% on thursday, as expected, in an 8-1 vote. chief economist huw pill was the lone dissenter, voting for a 25bp hike. the iran war is creating a dilemma for policymakers. the boe said energy prices are "highly uncertain" and that monetary policy can't influence them directly. inflation hit 3.3% in march, up from 3%, driven by fuel costs. the bank laid out three scenarios: in the best case, inflation peaks at 3.5% this year. in the worst, it hits 6.2% in early 2027, forcing rates to 5.25% and risking recession. deputy governor clare lombardelli called that worst case "plausible" but not central. the pound rose 0.4% to $1.3473 after the decision. the 10-year gilt yield fell 6bp to 5.014%. david rees at schroders said the bar for rate hikes "remains high" given slack in the labor market and likely weakening growth.