LONDON – The ongoing Middle East conflict is creating fresh headwinds for the UK economy, leaving the Bank of England with limited scope to respond in the near term.

The Monetary Policy Committee is widely expected to vote 7–2 to hold Bank Rate at 3.75% when it announces its decision at midday on Thursday.

A day ahead of the BoE and ECB rate decisions, both North American central banks opted to leave policy unchanged. Bank of Canada Governor Tiff Macklem said it was too early to assess the economic impact of the conflict, though he warned it would likely lift global inflation in the near term. A similar message was echoed by Federal Reserve Chair Jerome Powell later in the day.

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FRANKFURT – Euro area central bankers are widely expected to stay the course on interest rates Thursday as they scramble to gauge the impact of the Iran war on consumer prices and economic growth in Europe.

Traders and analysts disagree about the next steps for the public lender, with swap market data showing the former expect at least one interest rate hike by July as a Reuters poll said the wide majority of economists anticipate no changes this year.

Headline annual inflation in the Eurozone remains near the ECB’s target range of 2% over the medium term. It rose unexpectedly to 1.9% last month from 1.7% in January, which prompted some commentators to suggest the bank could take a more hawkish stance this month.

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The Swiss National Bank has once again held its benchmark interest rate steady, as expected, even after the Iran war has a significantly strengthened the country’s currency and raised its inflation outlook.

The SNB said Thursday that it would keep its policy rate at zero percent, a level set in June 2025. Virtually all economists polled had predicted the decision – the fourth hold in a row – with the vast majority anticipating the rate to remain the same throughout 2026. Unchanged rates in June, September, and December followed six straight cuts that began in March 2024.

EUR/CHF edged higher after the decision to trade just above 0.91 before falling back below that mark later in the session. USD/CHF was little changed around 0.79. The Fed left its interest rates as is on Wednesday, as expected. Economists predict officials at the European Central Bank will do the same later Thursday.

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Japan’s equity investors will closely watch a meeting between President Donald Trump and Prime Minister Sanae Takaichi in Washington on Thursday for possible agreements on economic and military cooperation.

Any details on Japan’s $550 billion government-backed investment plan in the US has potential to impact energy and shipbuilding sectors. Defense stocks may react as Takaichi faces a diplomatic challenge after Trump called on Japan to deploy warships to the Strait of Hormuz and then withdrew the demand.

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