Bank of England Warns High Energy Prices May Warrant Higher Interest Rates

Bank of England Deputy Governor Clare Lombardelli warned that prolonged high energy prices could lead to broader economic effects, potentially necessitating higher interest rates. Speaking at the Sixth Biennial Conference on Macroeconomic Policy in Warsaw, Lombardelli emphasized that monetary policy remains restrictive as officials balance lower inflation against risks of reduced demand.

Lombardelli noted that wage growth continues to run too high to align with the Bank of England’s inflation target. She clarified that she was not suggesting a mechanical response to energy price movements, but rather a consideration of how these effects spread through the system.