The Bank of England kept its policy rate unchanged at 3.75% on Thursday, as falling oil prices after a recent US-Iran truce eased some inflation concerns, though policymakers warned that the outlook remains uncertain.
The bank's Monetary Policy Committee voted by a majority of 7-2 to maintain the Bank Rate at its meeting ending June 17, according to the monetary policy summary.
Two members, Chief Economist Huw Pill and external member Megan Greene, voted to raise the rate by 25 basis points to 4%, citing concerns over persistent inflation pressures.
The central bank said global energy prices have fallen since the previous meeting in response to developments in the Middle East, but remain above pre-conflict levels and continue to be volatile.
"Oil prices have fallen in recent days and that's encouraging," Governor Andrew Bailey said in written remarks alongside the decision. In the paragraph reflecting his own views, he added: "The situation remains unpredictable and there is clearly a risk that energy prices remain elevated for an extended duration."
The truce between the US and Iran has helped ease investors' most pessimistic inflation scenarios, with oil prices this week falling below $80 per barrel for the first time in around three months after previously reaching $108.
The Bank of England lowered its estimate for peak inflation to 3.25% in the fourth quarter of this year, compared with a 3.6% projection in April.
UK annual consumer inflation has fallen to 2.8% since the previous meeting, though the bank said it is expected to rise later this year as higher energy prices continue to pass through.
The committee warned that the longer energy prices remain elevated, the greater the risk of second-round effects in price and wage setting.
However, it also noted that the labor market continues to loosen, while signs of a weakening economy could help contain inflationary pressures.
Official data released earlier Thursday showed that 64,000 jobs have been lost since the Iran war started in February, while regular private-sector pay growth has slowed to its weakest level in five years.
Most MPC members judged that tighter financial conditions since the start of the Middle East conflict provided insurance against inflation risks, allowing the bank to keep rates on hold.
The decision came a day after the US Federal Reserve also left interest rates unchanged, while the European Central Bank raised its policy rate by 25 basis points to 2.25% earlier this month.
The committee said it would continue to closely monitor the situation in the Middle East and how its impact spreads through the economy.
