Bank of England Soundly Hawkish as Energy Prices Escalate

UBS AG economists expect the Bank of England's Monetary Policy Committee to sound more cautious at its September 17 meeting due to rising energy prices and a potential threat to inflation.

The bank is likely to keep interest rates unchanged at 3.75%, in line with market pricing of a 2.8 basis-point move for September, UBS said.

The voting split is expected to remain 6-3, with Huw Pill, Megan Greene, and Catherine Mann again voting for a 25 basis-point hike, while the rest of the committee backs holding rates.

Rising energy prices are likely to concern the MPC, as they have previously argued that a more persistent energy shock raises the risk of second-round effects feeding through to broader inflation.