Bank of England Maintains Rates with Divided Vote, Warns of Rising Inflation

The Bank of England's Monetary Policy Committee (MPC) kept interest rates unchanged, but the decision saw a more divided vote than anticipated, with a third policymaker backing a rate hike. Governor Andrew Bailey warned that indirect inflation effects, particularly from energy price shocks due to the Middle East conflict, are expected to add approximately 0.5 percentage points to UK inflation in the second half of 2026, pushing consumer prices further above the 2% target. The MPC's communication is seen as supportive for Sterling but limits the scope for a sustained rally due to the pushback against imminent rate increases.