The Bank of England held its benchmark interest rate at 3.75 per cent on Thursday, extending a four-meeting pause that began with the US-Iran war. The 7-2 vote, mirroring the Federal Reserve’s hold a day earlier, saw chief economist Huw Pill and external member Megan Greene dissent in favour of a quarter-point rise. The fourth consecutive hold since December’s cut to 3.75 per cent underscores the Monetary Policy Committee’s cautious approach to an inflation outlook clouded by geopolitical uncertainty.

The backdrop shifted markedly in the days before the meeting. A surprise US-Iran memorandum of understanding, announced on Sunday, promised to halt military operations and reopen the Strait of Hormuz, triggering a sharp drop in oil prices. Governor Andrew Bailey called the decline a “positive indicator” but stressed that energy costs remain well above pre-war levels. May’s inflation reading held steady at 2.8 per cent, defying forecasts of a rise to 3 per cent and reinforcing the case for patience. Yet the Bank’s projections see inflation climbing above 3.25 per cent in the final quarter, keeping pressure on households and complicating the path back to the 2 per cent target.

Viewed from Washington, the synchronised holds by the Fed and the BoE signal a shared transatlantic wariness about moving prematurely amid volatile commodity markets. In continental Europe, the European Central Bank raised rates last week for the first time in nearly three years, highlighting divergent forces across advanced economies. In London, the decision was read as a green light for mortgage lenders; Barclays announced further cuts on the eve of the announcement, and analysts foresee a gradual summer improvement in borrowing costs. Savers were advised to seize a “valuable window of opportunity” before any future shifts.

The MPC’s internal dynamics reveal a committee far from consensus. The dissenters argue a pre-emptive hike would anchor inflation expectations, while the majority views the “active hold” as effective tightening relative to pre-war expectations of cuts. Much now depends on the durability of the Iran peace framework and the reopening of energy supply chains. Should oil prices stabilise, the case for holding—or even resuming cuts later in 2026—could strengthen. A renewed geopolitical flare-up or stickier domestic price growth, however, would swell the ranks of the hawks. For now, Threadneedle Street remains firmly in watch-and-wait mode.