Bank of England Deputy Warns Rate Rise Likely if Energy Prices Persist

Clare Lombardelli, a deputy governor at the Bank of England, warned that interest rates are increasingly likely to rise if energy prices persist. Speaking in Warsaw on September 24, she noted that elevated energy costs are driving inflation expectations and wage bargaining across the economy.

Lombardelli stated, 'The longer higher energy prices persist, the greater the risk that indirect effects build and that inflation expectations, wage bargaining and price-setting behaviour begin to adjust in response.' She added, 'On that basis, policy is increasingly likely to need to tighten if elevated energy prices persist, absent clear evidence of disinflation or weaker activity.'

The warning comes as UK households face heightened financial pressure due to rising energy costs. Energy regulator Ofgem recently announced a 4% increase in its price cap, taking the average annual dual-fuel bill to £1,723 from October 1.