Interest Rate Hike Looms as Energy Prices Fuel Inflation Fears

A Bank of England deputy governor has warned that interest rates are becoming increasingly likely to rise if energy prices remain high.

The statement from Clare Lombardelli comes after inflation rose to a five-month high of 3.1% last month, moving further away from the Bank's target rate of 2%.

Lombardelli said that elevated energy prices could drive rate-setters to tighten fiscal policy unless there is particular weakness in the economy.

The key issue, according to Lombardelli, is not the spot price of energy itself but how it interacts with the underlying economy and wage bargaining and price-setting behavior.