The Bank of England is widely expected to hold interest rates at 3.75 percent as policymakers assess the economic impact of the conflict involving Iran. Inflation remains above the two percent target at 3.3 percent, and uncertainty linked to geopolitical tensions is prompting a cautious approach from rate-setters.

Economists say the central bank is unlikely to provide firm guidance on the future path of borrowing costs, with opinions divided over whether rates could still rise later this year or remain unchanged. Earlier expectations that inflation and interest rates would fall further in 2026 have been clouded by the outbreak of conflict and its effect on global markets.

The decision will affect borrowers, savers and businesses alike. Mortgage rates have risen since the start of the conflict, with the average two-year fixed deal climbing sharply before easing slightly in recent days. Savers are also watching closely, as higher inflation can erode the value of savings, particularly for those receiving low interest on their accounts.