BOE Holds Interest Rates Amid Rising Inflation Fears

The Bank of England is expected to keep interest rates at 3.75% for its next meeting on Thursday, despite rising inflation in the UK. This would be the sixth time in a row that the Monetary Policy Committee (MPC) has kept rates unchanged since December.

Economists think policymakers will continue to favor a 'wait-and-see' approach, particularly concerning the Middle East conflict's impact on the UK economy. However, three members of the nine-person MPC, Huw Pill, Megan Greene, and Catherine Mann, voted to hike rates to 4% at the last meeting, and economists expect the same outcome at the next one.

The Consumer Prices Index (CPI) inflation increased to 3.1% in August, from 2.9% in July, marking a five-month high and moving further away from the Bank of England's 2% target rate. Many experts forecast the cost-of-living to rise further, with households facing another rise in their energy bills from next month.

Thomas Pugh, chief economist at RSM UK, said: 'The rise in inflation in August is just the start of a new upward trend as higher energy, food, and memory chip prices continue to make their way through supply chains.' He predicts that inflation will peak at almost 4% in early 2027 before gradually dropping back to 2% in 2028.