Bank of England Holds Rate at 3.75% Amid US-Iran Deal

The Bank of England held its key interest rate steady at 3.75 percent on Thursday, extending a pause in monetary policy as policymakers weighed easing global energy pressures against persistent domestic inflation concerns. The decision came as financial markets worldwide reacted to a major geopolitical development and a significant shift in U.S. monetary policy, with assets from tech stocks to Bitcoin moving in starkly divergent directions.

The Monetary Policy Committee voted 7-2 to maintain the rate, with two members voting for an immediate quarter-point increase. Governor Andrew Bailey argued the economy remained too weak to start raising rates, warning that forcing inflation down too quickly could cause undesirable economic volatility. Official data showed the UK's annual inflation rate remained at 2.8 percent in May, above the central bank's 2 percent target. Bailey noted that tolerating temporarily above-target inflation may be appropriate given economic softness.

A key factor in the Bank's decision was a memorandum of understanding announced last week between the United States and Iran, aimed at de-escalating regional tensions and reopening the vital Strait of Hormuz. The...