The Bank of England’s Monetary Policy Committee is expected to hold rates at 3.75% on Thursday by a 7-2 margin, but City economists warn that a sustained oil price above $100 a barrel could trigger rate hikes later this year. Brent crude jumped above $100 on 23 July before falling to $96 on 25 July, up from $71 earlier in July; Nomura calculates two additional 25bp hikes would be needed at $100 oil, while Capital Economics forecasts rates could rise to 4.75% in a worst-case inflation scenario reaching 7%. Gas prices have also risen ahead of winter storage refill, and the European Central Bank is expected to hike on 10 September.
Context
The price spike followed the breakdown of the US-Iran ceasefire and disruption of tanker routes, but a subsequent three-night pause in attacks pushed oil back below $100, while Red Sea traffic fell after a Houthi attack on Saudi oil installations ,.