BoE Interest Rate Outlook Shaken by UK Inflation Surprise

UK inflation rose to 3.1% in August, exceeding market expectations and remaining above the Bank of England's 2% target.

The data, released on September 16, 2026, shows prices increased by 0.5% during the month, compared with 0.3% in July. Core inflation, which excludes food and energy prices, stayed at 2.6%. The Pound's reaction was limited, with GBP/USD around 1.3483, up 0.04% on the day.

Financial markets expect the Bank of England to keep interest rates at 3.75%, but some economists anticipate possible rate increases later. A Reuters poll found all 65 economists expected rates to stay unchanged, with most expecting them to remain at 3.75% until the end of the year. However, Morningstar data shows markets pricing in a possible rate increase as early as November, with three increases expected by mid-2027.