Bank of England Holds Interest Rate at 3.75 Percent Amid Rising Energy Prices
The Bank of England (BoE) maintained its benchmark interest rate at 3.75 percent on Thursday, despite rising global energy prices pushing up inflation.
According to the BoE, global energy prices have surged significantly since the July Monetary Policy Report and remain volatile. Spot prices of Brent crude and British wholesale gas have risen by 36 percent and 78 percent, respectively, since the period leading up to the July Report.
The bank's decision came as its Monetary Policy Committee voted 6-3, with three members advocating for a 0.25 percentage point increase to 4 percent. BoE Governor Andrew Bailey noted that while higher global energy costs have had a 'limited effect' on price and wage-setting in Britain so far, their persistence would ultimately lead to increased inflation.
The bank expects CPI inflation to rise to around 3.75 percent in the last quarter of 2026 and slightly above 4 percent in the first quarter of 2027, based on current energy prices. Bailey emphasized that the BoE's monetary policy is set to ensure inflation returns to its 2 percent target sustainably.
Analysts warned that raising interest rates could place additional financial pressure on households and businesses. James Smith from the Resolution Foundation stated that while there was welcome news on borrowing costs, the outlook on living expenses was 'sobering', with a forecasted 24 percent rise in the energy price cap set to send bills soaring.