Bank of England expected to leave interest rates on hold as oil and gas prices surge; UK pay growth hits five-year low– business live

03.11 EDT Introduction: Bank of England interest rate decision today Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. The world’s central bankers are facing a conundrum right now. With the Middle East crisis pushing up energy prices, inflation risks lingering, and economies looking weak, should they cut borrowing costs to support growth or raise them to subdue prices? Rather than make a choice yet, there’s a strong temptation to wait and see. And that’s why the Bank of England is expected to leave interest rates on hold at noon, after its latest monetary policy committee meeting. Before the Iran conflict started, an interest rate cut today was seen as an 80% chance by the money markets. But now, with oil over $100 a barrel, the markets indicate there’s a 97% chance that the BoE leaves interest rates on hold at 3.75% today. Ajith Nair, CIO of Isio Investment Management, explains: “Expectations for UK interest rates have shifted materially in recent weeks, with markets now anticipating that the Bank of England will hold rates in March, keeping rates at 3.75%, despite previously pricing in a cut. The primary driver has been the rise in oil and gas prices linked to the Iran conflict, which has pushed inflation risks higher. This creates a difficult backdrop for both policymakers and investors. In fixed income markets, UK government bonds have already come under pressure at times, with yields rising as rate‑cut expectations have been pared back and, more recently, partly restored. Shorter‑dated bonds are now reflecting a more uncertain path for policy rather than a straightforward easing cycle. The European Central Bank is also expected to leave interest rates on hold today. The Bank of Japan has got the ball rolling overnight, by leaving its lending rates unchanged, as the Bank of Canada did yesterday. Last night, the Federal Reserve left US interest rates on hold, and warned that the “implications of developmen...