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The Bank of England kept interest rates on hold at 3.75% on Thursday and set out scenarios for the economic impact of the Iran war, one of which could require a "forceful" increase in borrowing costs.
Below are key comments made by Governor Andrew Bailey at the press conference on Thursday.

ON DIRECTION OF BANK RATE IN FUTURE

"I would very much give the message: no, it is not the case that we’re sort of giving some sort of slightly clandestine message, that interest rates are going to go up notwithstanding what we’ve decided today, ... today is an active hold."

"Given the sheer unpredictability and drawing on the evidence from Scenario B, there’s a good case for holding rates now, but we must recognise that a prolonged spike in energy prices, as in Scenario C, could lead to a higher bank rate."

"I can’t give you a cast iron assurance that therefore there will be no increase (in bank rate) in any scenario or any of those scenarios ... What I can say to you is that there is a good, good deal of space available to accommodate that (inflation pressures)."

"The right decision today is to hold, but it’s an active hold ...it’s not a passive, ’wait and see’ hold...It’s to deliberately, actively hold."

"Do I think therefore that the interest rate curve is in the wrong place? No, I don’t, because there are risks around this."

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A long war in Iran would push up inflation in the euro zone and hurt growth but it is still too early to draw any conclusion about the conflict, European Central Bank policymaker Joachim Nagel said on Thursday.

"If the conflict comes to a swift end...the consequences for inflation would be short-term and limited overall," he said in a speech.

"By contrast, if energy prices were to remain elevated for an extended period of time, this would tend to lead to higher inflation and weaker economic activity in the euro area."

He added it was still too early to draw conclusions for the setting of interesting rates.

Nagel, the Bundesbank’s president, was presenting the German central bank’s annual report for 2025, which showed an 8.6 billion loss as a result of bonds bought during the stimulus programmes of the last decade.

While the losses were becoming smaller, Nagel expected the Bundesbank to close 2026 still in the red.

The annual accounts also showed the Bundesbank had not moved its 3,350 tonnes of gold, which remain stored in Frankfurt, New York and London.

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