Bank of England Sounds Warning on Inflation as Energy Prices Soar

The Bank of England has warned that Britons should prepare for higher inflation and interest rates due to rising energy prices. In its latest decision, the bank kept interest rates at 3.75%, but three members of the monetary policy committee voted to raise them.

The bank's forecast shows that consumer price index (CPI) inflation is expected to hit 3.75% in the final three months of this year and could rise above 4% by early next year. The Ofgem price cap for household energy bills is set to increase by 4% in the fourth quarter of this year, with a further 24% hike expected in the first quarter of next year.

The bank's decision comes as oil prices have spiked due to military activity in the Gulf and the shutdown of a key pipeline. This has led the bank to signal that it is tracking its adverse economic scenario, which includes inflation rising to 4.1% by this time next year and interest rates increasing to 4.25%.