Energy Price Pressures Fuel Fears of Bank Rate Hike

Bank of England deputy governor Clare Lombardelli has warned that an interest rate rise is increasingly likely if high energy prices persist. She stated this during a speech in Warsaw, where she noted that prolonged energy price pressures risk driving up inflation expectations and overall consumer prices.

UK inflation recently reached a five-month high of 3.1 per cent, with households facing a four per cent increase in the energy price cap next week. The central bank forecasts inflation will rise to around 3.7 per cent in the fourth quarter of this year and 4.2 per cent in early 2027.

Lombardelli's comments come as food price inflation is also expected to increase towards four per cent early next year, as energy costs filter through to food manufacturers. This development could further fuel concerns about a potential interest rate hike by the Bank of England.