The Bank of England held its base rate at 3.75%, but warned that prolonged conflict in the Middle East and higher energy prices could reignite inflation and eventually require higher borrowing costs. Its six-to-three decision came alongside an unexpected plan to transfer billions of pounds of government bonds to the Treasury, aiming to reduce disruption in the gilt market.

The Bank plans to sell £146bn of bonds to the Treasury at roughly £20bn a year until 2034, subject to approval from Chancellor John Healey next April. The Treasury’s Debt Management Office would replace them with shorter-term borrowing, while investors broadly welcomed the proposal as 30-year gilt yields moved towards their sharpest daily fall since 20 May; economists said a rate rise in November remained possible.