FTSE 100 Live: Stocks slump as oil soars on Iran attacks, BoE holds rates steady Proactive uses images sourced from Shutterstock
FTSE 100 down 219 points to 10,085
Brent crude oil soars as Iran and Israel attack energy facilities
UK unemployment rate stable at 5.2% last month, wage growth slowed
Bank of England decision at midday
The Bank of England has held interest rates at 3.75%, with the monetary policy committee voting unanimously to sit tight as the Middle East conflict drives energy prices sharply higher and clouds the inflation outlook.
The Bank warned that CPI inflation – currently 3% – could rise to 3.5% by the third quarter, but said it was equally alert to the risk that higher energy costs would weaken an already fragile economy.
It’s coming up to the Bank of England decision, though no changes to interest rates are expected.
“It’s hard not to feel sympathy for the BoE”, says market analyst Kathleen Brooks at XTB, ahead of today’s monetary policy committee meeting.
“Less than three weeks ago there was an 80% chance of a rate cut at this meeting, now there is a small chance of a hike. This 180-degree turn in rate cut expectations has nothing to do with the BOE or the UK economy, and everything to do with the Middle East conflict that is causing an historic energy price spike.”
A hold on rates is expected, she says, with the BoE likely to “try to buy some time to see how the war plays out in the coming weeks and months”.
She says “the risk is that central bankers, typically a conservative bunch, spook markets with bleak outlooks” but thinks that “there is a good chance that the BOE will want to stress the unique position that it finds itself in”, with things “very different now compared to 2022” when Russia invaded Ukraine.
“Back then, the UK economy was strong, there was a post-covid boost, unemployment was at historically low levels, wages were rising rapidly and the consumer was happy to spend. The current energy price spike is happening when the UK economy is weak.”
If the MPC does suggest…
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