BOE Governor Warns Iran Tensions and Extreme Weather Could Reignite UK Inflation

Bank of England Governor Andrew Bailey warned that Iran-related tensions and extreme weather could trigger another surge in inflation ahead of next month’s budget. According to Sina Finance, he told lawmakers that disruptions in the Strait of Hormuz and pressure on refining capacity could push up energy prices and add to global market volatility. Bailey said UK drought conditions and the global El Nino pattern could also force the central bank to revise its economic forecasts. He added that the Bank of England’s outlook already assumes food inflation will rise to about 3.5% by year-end, while the central bank said conflict in the Gulf could lift inflation to 3.2% in the fourth quarter from 2.9% in July. He also urged lawmakers not to draw quick conclusions about the path of UK interest rates. Markets widely expect the Bank of England to keep rates unchanged at next week’s policy meeting, while pricing shows a 25-basis-point rate hike is possible before year-end.