Energy Price Pressure May Drive UK Interest Rate Hike

A Bank of England deputy governor has warned that interest rates may need to rise if energy prices persist at current levels.

Clare Lombardelli, a deputy governor since 2024, said that high energy prices could drive rate-setters to tighten fiscal policy unless there is significant weakness in the economy.

Inflation rose to a five-month high of 3.1% last month, and is predicted to keep rising over the coming months as higher energy costs continue to filter through.

The Bank has predicted that inflation will increase to around 3.7% in the fourth quarter of this year and 4.2% in the first quarter of 2027.