By Adam Clark

The Bank of England held interest rates steady on Thursday as central banks around the world take stock of the hoped-for end to the U.S.-Iran conflict.

The Bank of England maintained borrowing costs at 3.75%. Seven policymakers voted to keep rates at that level, while two dissented and voted for a quarter-point increase.

That followed the example of the Federal Reserve, which held the benchmark federal-funds rate target steady at a range of 3.50% to 3.75% on Wednesday.

However, it marks a divergence from the European Central Bank and the Bank of Japan, both of which raised rates in their most recent decisions.

Global central banks are taking different approaches when it comes to inflation driven by the Iran war and the resulting disruption to energy supplies. While the ECB and the Bank of Japan have opted to take action in the face of the inflationary risk, the Fed is still treating the impact as a temporary shock for now -- a stance which could be reinforced by expectations of a preliminary U.S.-Iran peace deal to be signed this week.

"Monetary policy cannot influence energy prices but is being set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably," the Bank of England's Monetary Policy Commitee said in a statement on Thursday.

"In setting policy at this meeting, the Committee continued to judge that weakness in demand and the labour market was likely to lessen the strength of second-round effects from higher global energy prices."

The Bank of England might have been swayed against hiking rates by the latest U.K. inflation reading. The annual rate of inflation came in at 2.8%, according to Wednesday consumer price index data, the same as in April. A consensus of economists polled by The Wall Street Journal had expected May's rate instead to climb to 3.0%.

"While energy-related pressures may continue to filter through over time, this reading suggests inflation is not moving materially off track, and gives policymakers more confidence that rates can remain where they are for now," said Ian Corfield, CEO of Secure Trust Bank, ahead of the decision.

Write to Adam Clark at adam.clark@barrons.com

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June 18, 2026 07:16 ET (11:16 GMT)

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