Bank of England Maintains Rate, Warns of Hike Amid Energy Price Volatility

The Bank of England maintained its benchmark interest rate at 3.75% on Thursday but warned that a hike might be needed due to persisting energy price volatility triggered by the Middle East war.

Bank of England governor Andrew Bailey stated that so far, higher energy costs have had a limited effect on price and wage setting in the UK, 'but the longer this volatility persists, the bigger the impact it will have on inflation, and the more likely it is we will need to raise' the benchmark rate.

The decision came after the Federal Reserve lifted US interest rates for the first time since 2023, citing the need to combat surging inflation. The Bank of England expects price pressures to rise further, projecting inflation to reach four per cent by the first quarter of 2027.