Bank of England lifts key rate to 4% as US‑Iran tension looms

The Bank of England increased its benchmark interest rate to 4%, up from 3.75%. The central bank warned that more hikes could follow if the conflict between the United States and Iran continues. It noted that the war risks keeping energy prices high, which would add pressure on the economy. The BoE also projected that consumer price inflation will reach a peak of 4.8% in the second quarter of 2027. The rate rise is intended to bring inflation back to the Bank’s 2% target over time. By tightening borrowing costs, the Bank hopes to curb demand and ease price growth. The warning signals that policymakers remain ready to act should external shocks worsen. ## Context Central banks typically raise rates when inflation stays above target. Geopolitical tensions that push oil and gas prices up can make it harder to lower inflation, so the BoE’s caution reflects the link between global events and domestic price pressures.