Bank of England Expected to Hold Interest Rate at 3.75% Amid Iran Conflict Uncertainty

The Bank of England is widely expected to keep its benchmark interest rate at 3.75% on Thursday, as the Monetary Policy Committee weighs the economic impact of the ongoing conflict in Iran. Inflation remains above the 2% target at 3.3%, and analysts cite high uncertainty over the war's repercussions.

The decision will be announced at 12:00 BST. Alongside the rate announcement, the MPC will publish its first full monetary policy report and set of economic forecasts since the US-Israeli strikes on Iran began in late February.

"The repercussions of the [Iran] conflict are still keenly felt and uncertainty about how the situation could evolve also remains high, which will be key points the Monetary Policy Committee (MPC) will have to consider," said Sandra Horsfield, economist for wealth management group Investec.

The conflict has pushed up mortgage costs for homeowners securing new fixed-rate deals. According to financial information service Moneyfacts, the average rate on a two-year fixed mortgage was 4.83% at the start of the conflict, rose to a peak of 5.90%, and now stands at 5.81%. A host of lenders have announced cuts in the last 24 hours, but brokers caution that fixed-rate rises in the coming weeks cannot be ruled out.

"The standard advice in uncertain economic times stands: secure a mortgage rate you think suits your circumstances or looks reasonable value for money as soon as you can, then try to switch to a cheaper deal with the lender before your mortgage is due to complete," said Aaron Strutt, from mortgage broker Trinity Financial.

Savers are also closely watching the MPC outcome. Interest offered on half of UK savings accounts can beat the current 3.75% Bank of England benchmark rate, according to Moneyfacts, but those who have not switched provider for a long time typically get the worst deal.