The Bank of England has held interest rates steady, underscoring a cautious approach as policymakers assess the economic impact of rising energy costs and geopolitical tensions.

The decision by the Monetary Policy Committee leaves borrowing costs unchanged at 3.75 per cent, reflecting what analysts describe as a “holding pattern” while the outlook remains uncertain.

Suren Thiru, chief economist at Institute of Chartered Accountants in England and Wales, said the move would be disappointing for households and businesses already under strain. “Keeping interest rates unchanged will feel like a setback for those dealing with a renewed energy shock and firms trying to access finance,” he said.

The near-unanimous vote suggests policymakers are waiting for greater clarity on the economic fallout from the conflict involving Iran before adjusting policy. The Bank’s latest forecasts point to stagflation — the combination of weak growth and rising prices — as a growing risk, complicating the path ahead.

That tension is likely to shape future decisions. Rate-setters must balance the need to contain inflation against the risk of further weakening economic activity, particularly as businesses face higher input costs and softer demand.

Thiru said that while rates could remain at current levels for much of the year, the outlook is finely balanced. Any renewed surge in inflation could prompt a more hawkish stance within the committee, increasing the likelihood of further tightening.