THE Bank of England is expected to hold interest rates at 3.75 per cent on Thursday due to the inflationary pressures from the Iran war.

Rates had been gradually coming down from a peak of 5.25 per cent in a bid to stimulate growth in the economy.

But economists believe the global energy crisis caused by the US-Israel war at the end of February will put the brakes on any further cuts as the bank’s monetary policy committee performs a “balancing act” between inflation and growth.

Gross domestic product declined by 0.1 per cent in April, the first contraction in eight months, the latest official data show.

The European Central Bank blamed the conflict’s “inflation pressures” for increasing its interest rate on Thursday for the first time in almost three years.

The US Federal Reserve is expected to announce it will keep rates on hold on Wednesday.