Bank Warns of Rate Rise as Energy Prices Continue to Soar

The Bank of England is increasingly likely to raise interest rates if energy prices remain high, according to deputy governor Clare Lombardelli. This warning comes as inflation hit a five-month high of 3.1 per cent last month and is predicted to continue rising over the coming months.

Lombardelli stated that while the spot price of energy itself may not be the key issue, its interaction with the underlying economy and the nature of its transmission will ultimately determine whether interest rates need to rise.

The Bank has predicted inflation will increase to around 3.7 per cent in the fourth quarter of this year and 4.2 per cent in the first quarter of 2027, with households set to witness a roughly four per cent rise in the energy price cap from next week.