The Bank of England has warned about the impact of the Ukraine crisis on global commodity prices, minutes of their last policy meeting showed today.
The Bank of England also said that the British pound had won support from investors seeking a haven because of the tensions over Ukraine, according to minutes of its March 5-6 meeting.
The minutes noted that "the most important impact from a more serious deterioration in the situation would probably come from any general rise in risk premia and via commodity markets - in particular the prices of gas, oil, and grains".
"The sterling effective exchange rate index had appreciated. Market contacts ascribed these movements in part to improved optimism regarding growth in the United Kingdom relative to its major trading partners and in part to investors seeking relatively safe assets following the intensification of political tensions between Ukraine and Russia," the minutes added.
Crimea voted at the weekend to leave Ukraine and join Russia in a disputed referendum that has sparked US and EU sanctions against Russian President Vladimir Putin's inner circle.
Shrugging off the international outcry, Putin yesterday signed a treaty with Crimean leaders bringing the strategic Black Sea peninsula into Russia.
Much of the Russian gas that accounts for roughly 40% European imports flows through pipelines that cross Ukraine, and the country is also a big exporter of wheat and corn.
The Bank of England minutes meanwhile also revealed today that the MPC had voted 9-0 to freeze its key lending rate at 0.50 percent, where it has stood since March 2009 to in order to boost growth.
Policymakers were united in maintaining the BoE's bond-buying quantitative easing (QE) scheme at £375 billion.
The MPC expressed confidence over Britain's economic recovery. Policymakers said initial data "implied that the broadening of the recovery... from household to business spending might have already begun".