BOE Sees Case for Another Rate Hike If Iran War Doesn't End

Speaking at a news conference in London after Thursday’s rate decision, Bank of England Governor Andrew Bailey rejected the idea that policy was limited to two hikes. Asked whether another increase was possible, he said he was not prepared to “sign up to the two-and-done point” and could see a case for a further 25 basis points if the conflict in the Middle East remains unresolved.

The comments follow Thursday’s rate hike and add a conditional scenario to the Bank of England’s policy path. Bailey linked the next move to the persistence of the Iran war rather than presenting another increase as a fixed commitment.

The direct mechanism runs through the Bank of England’s assessment of the conflict’s economic effects and the resulting inflation pressure. Bailey’s wording makes the continuation of the war the condition for considering another increase, while a resolution would change that policy calculus.

The timing of any further move remains conditional on developments in the Middle East and the Bank of England’s response to them. The next rate decision and the conflict’s status are the key reference points for determining whether Bailey’s scenario becomes policy.