Bank of England Hikes Rates as Energy Prices Soar

Kathmandu: The Bank of England (BOE) increased its main interest rate for the in more than three years targeting to tame surging inflation rate triggered by the soaring price of petroleum products following US-Iran war.

Interest rates in the UK had been trending downward from a 15-year high of 5.25 percent until the US and Israel attacked Iran. According to international media, the BoE has recently raised its interest rate to 4 percent from 3.75 percent.

The BOE Governor Andrew Bailey said at a press briefing that it was the first interest rate hike since August 2023. “There is now enough inflationary pressure in the pipeline caused by the rise in energy prices that an increase in Bank rate is warranted,” Bailey said.

The main cause of the spike in UK inflation this year has been the sharp rise in fuel costs resulting from the Iran war and the ensuing bottlenecks in the Strait of Hormuz, which have squeezed global oil and gas supplies and pushed prices at the pump and household energy bills higher.

Meanwhile, the oil prices that witnessed sharp drop after heavy losses suffered by the Republican Party in the US midterm elections, bounced back on Friday. As an impact of the US election results, Brent Crude was down around US $15 a barrel on Wednesday, falling to as low as US $96.  

However, Crude oil prices moved higher again, with Brent approaching US $100 a barrel. It has been attributed mainly to the reduced refining activity in Russia, alongside supply disruptions took place across Asia and Middle East.