The Bank of England is widely expected to keep interest rates unchanged on Thursday, with inflation still running close to policymakers' 2% target despite fighting in the Middle East driving up energy costs.

The BOE's policy decision comes a day after the Federal Reserve held borrowing costs steady.

The U.S. central bank left investors guessing in the run-up to its policy decision, with some traders expecting a hike given that consumer-price inflation stood at 3.5% as of June.

But the market is a lot more certain the BOE will maintain the bank rate at 3.75%. That's because U.K. inflation slid to 2.6% -- its lowest level in 15 months -- in June, thanks to lower energy and food costs.

Still, the BOE's Monetary Policy Committee may signal on Thursday that it is willing to hike rates if the disruption of shipping through the Strait of Hormuz triggers a flare-up in price pressures.

"Against the backdrop of the recent re-escalation in the Middle East, we expect the Committee to emphasise that the path ahead will depend heavily on how the conflict evolves," UBS economist Anna Titareva wrote.

The decision comes less than two weeks after Andy Burnham became the U.K.'s fifth prime minister since 2022. Barron's argued last week that one of the new leader's top priorities should be soothing the bond market, given there are already jitters about some of Burnham's economic plans.