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Bank of England cautions that further rate rises may persist unless Iran conflict ends
The Bank of England has suggested that today’s borrowing cost increase may not be the final one if the Iranian war continues, as it forecasts inflation nearing 5% by mid-2027.
Britain has seen its first upward move in interest rates for three years, a shift that comes with a stark warning from the central bank. Policymakers indicated that unless there is a resolution to the conflict involving Iran, this may not be the last tightening of monetary policy.
The Bank also released a sobering projection for price growth, expecting it to climb close to five percent by the middle of 2027. That outlook underscores the persistent inflationary pressures weighing on the economy even as officials act to cool demand.
In financial markets, investors responded by buying up UK government debt. The increased appetite for gilts drove down the return on ten-year bonds by four basis points, leaving the yield just above 5.1 percent.
That level marks the lowest point for the benchmark since late August, reflecting a cautious mood among traders who are balancing rate hike risks against geopolitical uncertainty.
Source: The Guardian
Written with AI from the linked source