Bank of England Hints at Future Rate Hike Amid Inflation Fears

The Bank of England kept interest rates on hold at its latest meeting, but hinted that it may raise them soon to combat inflationary pressures.

With six members of the Monetary Policy Committee voting to keep rates unchanged and three backing a quarter-point increase to 4%, financial markets think it's more likely than not that the bank will hike rates at one of its next two policy meetings, either in November or December.

Bank Governor Andrew Bailey said that while higher global energy costs have had a limited effect on price and wage setting in the UK so far, they are expected to increase inflation to around 4% in the first quarter of next year from the current 3.1%. This would take inflation further above the bank's target rate of 2%, prompting Bailey to warn that the longer this volatility persists, the bigger the impact it will have on inflation.

The decision was widely anticipated, with economists expecting the bank to act soon due to rising inflation and a growing problem for the British government as the servicing of its debt accounts for a higher proportion of its spending.