Bank of England Holds Fire on Interest Rates Amid Rising Inflation

The Bank of England is expected to keep interest rates unchanged at its next meeting on Thursday. This would be the sixth time in a row that the Monetary Policy Committee (MPC) has held rates steady since December, with experts favoring a 'wait-and-see' approach due to the ongoing Middle East conflict and its impact on the UK economy.

Rising inflation is a concern, however, as Consumer Prices Index (CPI) inflation increased to 3.1% in August from 2.9% in July. This marked a five-month high and takes CPI inflation further away from the Bank of England's 2% target rate.

Economists are forecasting further cost-of-living increases, with households facing another energy bill hike from next month. Thomas Pugh, chief economist at RSM UK, predicts that inflation will peak at almost 4% in early 2027 before gradually dropping back to 2% in 2028.

The MPC is also paying attention to recent surge in oil prices, with Brent crude oil rising above $107 a barrel this week. Despite these pressures, many economists believe the MPC will hold rates on Thursday, but some predict a hike may be necessary if energy prices continue to rise.