Bailey Warns High Energy Prices Could Prompt Rate Hike

Bank of England Governor Andrew Bailey warned that prolonged high energy prices could make it harder to keep interest rates unchanged ahead of the next rate decision. The Bank held its base rate at 3.75% after a meeting on September 17, with six members supporting no change and three others in favor of a 25-basis-point increase.

Bailey stated that as high energy prices persist, it becomes more difficult to keep interest rates unchanged. The central bank projected consumer-price inflation at about 3.75% in the fourth quarter of 2026 and slightly above 4% in the first quarter of 2027, based on current energy prices.

The Office of Gas and Electricity Markets (Ofgem) energy-price cap will rise to £1,723 for October through December, and could increase further in the first quarter of 2027. The differing views within the Monetary Policy Committee reflect the tension between renewed energy costs and signs of weaker domestic economic conditions.