Bank of England (BoE) Deputy Governor Sarah Breeden said during the European trading session on Thursday that the United Kingdom (UK) inflation would have been at the central bank’s 2% target if the Middle East war had not happened.

Additional remarks

Iran war shock is less likely to become embedded and lead to inflationary dynamics that we might need to lean against.

BoE is ‘in a good place’ to monitor what’s happening.

Market reaction

The British Pound (GBP) appears not to have reacted to BoE Breeden's comments. At press time, GBP/USD trades 0.12% lower to near 1.3520 as the US Dollar (USD) has rebounded.

BoE’s Breeden downplays inflation risk from Iran war shock

FXS Speechtracker score of 3.2/10, below the speaker’s 4.1/10 historic average, signals a mildly dovish tilt as Breeden argues the Iran war shock is less likely to become embedded in inflation dynamics. The remark that, absent war, inflation would already be at the 2% target reinforces the view that the BANK OF ENGLAND can lean less aggressively against price pressures, which is modestly negative for the Pound versus the Dollar and Euro.

By stressing that the BoE is “in a good place” to monitor leverage supporting AI valuations, Breeden acknowledges financial stability risks without pairing them with a call for tighter policy. Overall, the speech softens the perceived need for additional hikes, suggesting a lower-for-longer rate bias that may cap Pound upside while keeping sensitivity high to incoming inflation data.