The Bank of England and the European Central Bank have followed the leads of their central bank counterparts in the US and Canada by maintaining their respective current interest rate levels.
The Bank of England’s Monetary Policy Committee (MPC) voted 8–1 to maintain its bank rate at 3.75%. The sole dissenter on the vote sought to increase the bank rate by one-quarter percentage point to 4%.
“The conflict in the Middle East means that prospects for global energy prices are highly uncertain,” said the MPC in a statement. “Monetary policy cannot influence energy prices but will be set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably. The policy stance required to achieve this will depend on the scale and duration of the shock, and how it propagates through the economy.”
Over on the continent, the European Central Bank’s Governing Council stated that its interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will remain at 2.00%, 2.15% and 2.40% respectively.
“The war in the Middle East has led to a sharp increase in energy prices, pushing up inflation and weighing on economic sentiment,” said the Governing Council in a statement. “The implications of the war for medium-term inflation and economic activity will depend on the intensity and duration of the energy price shock and the scale of its indirect and second-round effects. The longer the war continues and the longer energy prices remain high, the stronger is the likely impact on broader inflation and the economy.”
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