Bank of England holds interest rates at 3.75% despite rising inflation

AI desk brief

The Bank of England left rates unchanged at 3.75% even as UK inflation rose to 3.1% in August from 2.9% in July, with the Middle East conflict lifting petrol and diesel prices by almost a quarter. Markets still see a 25bp hike as early as November, with three more increases pencilled in to 4.75% next year.

The decision comes against a broader global tightening backdrop, after the Fed raised rates for the first time since 2023 and the ECB also hiked. The energy shock and higher policy-rate path are supportive for inflation hedges, but the prospect of firmer yields limits the near-term upside for precious metals.