Bank of England holds interest rates at 3.75% but warns war could force future rises

Central bank announces surprise plan to sell billions of pounds in government bonds back to the Treasury

• Burnham has to sell Bank rate rises as ‘breathing space’ – good luck with that

• Business live – latest updates

The Bank of England has kept interest rates on hold as it warned a continuation of the bitter fighting in the Middle East could force it to raise borrowing costs amid mounting fears over inflation.

It also announced a surprise plan to sell billions of pounds in UK government bonds back to the Treasury to avoid fuelling turbulence in the gilt market, a decision that could have significant consequences for the public finances before next month’s budget.