Bank of England Deputy Governor Sarah Breeden warned Thursday that the central bank is maintaining a cautious stance on inflation risks despite progress toward the 2% target. Speaking during European trading hours, Breeden attributed the current inflation overshoot directly to the ongoing Middle East conflict, stating UK inflation would have already reached the BoE’s target level without the war’s economic impact.
The comments signal the BoE remains concerned about external geopolitical shocks derailing its inflation-fighting efforts. The Middle East conflict has driven energy and commodity price volatility, creating persistent upward pressure on UK consumer prices. Breeden’s remarks suggest policymakers are distinguishing between domestic inflation dynamics and war-driven factors when assessing monetary policy.
Sterling traders should note the BoE’s vigilant posture may keep rate cut expectations muted despite headline inflation improvements. The central bank appears prepared to maintain restrictive policy longer if geopolitical tensions continue fueling price pressures.
FXnCO Insight
GBP pairs may find support from hawkish BoE messaging, particularly if Middle East tensions escalate further and energy prices spike again.
Source: FXStreet