BoE Hints at Future Rate Hikes as Energy Prices Fuel Inflation Concerns

The Bank of England (BoE) has decided to hold its interest rates at a 25-basis-point increase proposed by three policymakers, Megan Greene, Catherine Mann, and Huw Pill. The majority voted against the hike, citing that domestic inflation pressures have not yet shown persistence like energy prices.

The BoE's decision comes as UK CPI could rise to around 3.75% in the fourth quarter of 2026 and slightly above 4% in the first quarter of 2027 due to higher oil, gas, and refined-product prices following the escalation in the Middle East.

The Bank will pause active gilt sales for six months while stopping sales of long-dated gilts altogether. The decision aims to reduce its stock of government bonds to zero over time, with an average annual reduction of about 46 billion pounds.