Higher Energy Prices Spark Interest Rate Hike Fears

Bank of England deputy governor Clare Lombardelli has warned that higher energy prices could drive interest rate hikes if they persist.

In a speech in Warsaw, Ms. Lombardelli stated that elevated energy costs may lead to inflation expectations and wage bargaining adjusting in response.

'The longer higher energy prices persist, the greater the risk that indirect effects build and that inflation expectations, wage bargaining, and price-setting behavior begin to adjust in response,' she said.

The Bank of England has predicted that inflation will increase to 3.7% in Q4 this year and 4.2% in Q1 next year due to higher energy costs.