Oil prices dipped slightly this week even after Israel sent ground forces into the Gaza Strip, raising tensions in the Middle East, as investors remain cautions following news that both the US Federal Reserve and the Bank of England have keep interest rates at their current levels but haven’t ruled out further increases if needed.

The Bank of England kept its main interest rate unchanged on Thursday at the 15-year high of 5.25 per cent and indicated that borrowing costs will likely remain at these sorts of elevated levels for a while, especially if oil and gas prices increase sharply on the back of the conflict between Israel and Hamas.

In economic projections accompanying the decision, the bank said inflation is set to fall to below 5 per cent in October as domestic energy bills fall. However, it cautioned that oil and gas prices may start to rise again in light of the Israel-Hamas war.

Officials had previously thought that inflation would return to the 2 per cent target by the second quarter of 2025. But they revised the forecast on Thursday to say that inflation would remain above 2 per cent until the final quarter of 2025. The bank in September ended a nearly two-year run of interest rate rises. The US Federal Reserve and the European Central Bank have also held interest rates over the past week.
   

The Bank of England, like other central banks, raised interest rates aggressively from near zero as it sought to counter price rises first stoked by supply chain issues during the coronavirus pandemic and then Russia's invasion of Ukraine, which pushed up food and energy costs.

Higher interest rates, which cool the economy by making it more expensive to borrow and bearing down on spending, have contributed to bringing down inflation worldwide.

The pain of higher interest rates is still to come for many homeowners in the UK Unlike in the United States, for example, most homeowners in the UK lock in mortgage rates for only a few years. Those whose deals expire soon — an estimated 2 million households over the coming year — know that they face much higher borrowing costs in light of the sharp rise in interest rates over the past couple of years.

Though a predicted recession has not materialized over the past year, the economic backdrop is hardly ideal for the governing Conservative Party given that a general election must take place by January 2025.

Treasury chief Jeremy Hunt said a budget statement he is due to deliver later this month will look to “boost economic growth by unlocking private investment”, and "delivering a more productive British state”.

Fuel card users can expect a fall in the region of 1.0 t0 1.5 pence per litre

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