Bank of England Eyes Rate Hike as Energy Prices Loom Large

The Bank of England's Monetary Policy Committee voted 6-3 to keep interest rates at 3.75%, but warned that they are prepared to hike them if energy prices remain high.

According to ING Think, the chances of a November rate hike depend on whether oil and natural gas prices come down. If they do, the Bank may stay on hold or even cut rates in 2027.

However, if energy prices remain steady, the Bank is prepared to hike rates in November and potentially again in the new year.

The Bank's forecast suggests that inflation will peak above 4% early next year, which could lead to second-round effects. Deputy Governor Sarah Breeden noted that inflation is approaching 'levels associated with non-linear effects'.