Related topic: Inflation

One member voted to increase Bank Rate to 4%.

The rise reflects higher energy prices alongside wider economic uncertainty, although many industry experts expect the Bank of England to pause rather than hike rates.

The UK is projected to suffer the sharpest cut to economic growth forecasts.

Holding policy steady is preferable until the impact becomes clearer, Taylor says.

Markets are now pricing in the possibility of multiple interest rate increases this year.

This comes amid continued disruption in the Strait of Hormuz and significant damage to energy infrastructure across the Gulf.

There is growing market speculation that the Bank of England could increase rates as a direct consequence of the ongoing Iran-related conflict.

Some mortgage lenders cancelled planned rate cuts earlier in the week while others have increased rates.

GDP is expected to grow more slowly this year but faster in 2027 and 2028, the latest OBR forecasts show.

Lower inflation and interest rate cuts will help unlock money so it can be spent in the economy, Martins said.