Bank of England set to hold at 3.75% as Iran war forces stagflation reckoning

The Bank of England is widely expected to hold Bank Rate at 3.75% in a Reuters poll of 62 economists, with markets focusing on the vote split (likely 8-1) and new Monetary Policy Report forecasts rather than a rate change. Forecasters expect higher inflation and weaker growth — a stagflation mix — which, together with Britain’s gas dependence and G7-high gilt yields, increases vulnerability to the Iran-driven energy shock. BNP sees two 2026 hikes and inflation peaking near 4.5% (current ~3.3%); NIESR cut UK growth to 0.9% this year and 1.0% in 2027. The BoE press conference and vote will determine whether markets interpret policy as leaning hawkish or dovish; some strategists argue that market-implied rate pricing is already a tightening force. Overall, the piece signals mixed market implications for sterling and UK rates — downside risk from stagflation and energy shock, but continued uncertainty depending on the BoE’s tone and forecasts.