Bank of England Warns Interest Rates May Rise Due to Energy Price Pressure

The Governor of the Bank of England, Andrew Bailey, has warned that high energy prices will make it increasingly difficult to maintain current interest rates and avoid a hike. This comes after Deputy Governor Clare Lombardelli stated that a rate increase is 'increasingly likely' if energy prices remain elevated.

Bailey voted alongside five others to keep UK interest rates at 3.75% earlier this month, but now suggests it will become harder to maintain this stance as energy costs continue to rise. He noted that the longer high energy prices persist, 'the harder it gets' for the Bank to keep rates low.

The central bank has predicted inflation will increase to around 3.7% in the fourth quarter of this year and 4.2% in the first quarter of 2027, with economists widely predicting a rate hike later this year to help bring inflation down to its 2% target level.