BoE keeps Bank Rate at 3.75% as energy shock sustains inflation risk

The Bank of England held the base rate at 3.75% with a 7-2 vote to stay put; two MPC members favored a 25bp hike to 4%. Inflation remains pressured by higher energy costs amid the Iran war, with UK inflation at 2.8% in May and the economy contracting 0.1% in April. The energy price cap is set to rise about 13% later this summer, potentially lifting inflation again, while markets still price in a rate move by year-end. The BoE stressed it cannot influence global energy prices and will act to prevent persistent inflation rather than time the cycle precisely.