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Thu, 19 Mar 2026

Thu, 19 Mar 2026 Impact of Iran war expected to bring hold in interest rates

Before the conflict began, analysts had expected a cut in the Bank rate at this meeting.

* Economic impacts of the war in Iran are likely to lead the Bank of England to hold interest rates at 3.75%.
* Analysts had predicted a cut in the Bank rate before the conflict began, but upheaval in markets and higher oil prices have ruled out such a move.
* Economists are uncertain about the likelihood or frequency of any interest rate cuts later in the year, with some discussing the possibility of an increase due to a drawn-out war and economic shock.
* Oil prices have surged due to disruption in trade routes, which will likely feed through to domestic energy prices and put upward pressure on inflation.
* Interest rates are the primary tool available to the Bank to hit its 2% inflation target rate, so economists expect the MPC to stand back from changes to gauge the duration and severity of price shock.
* Markets have priced-in an interest rate hold, but lenders have also reacted by pulling deals and raising rates on new fixed deals.
* The average two-year fixed mortgage rate has jumped to 5.30%, while the five-year rate has gone up to 5.35%.
* Wider borrowing costs are likely to be affected, including credit cards and personal loans.
* A hold in interest rates will provide "some short respite" for savers but is not a long-term solution.
* About two-thirds of UK savings accounts fail to beat the Bank rate of 3.75%.