MPC Set to Hold Rates Steady Amid Rising Energy Prices

The Bank of England is expected to keep interest rates unchanged at its next meeting on September 17, but experts warn that policymakers need to be prepared to act if energy prices continue to surge.

Most economists predict that the Monetary Policy Committee (MPC) will hold rates at 3.75% for the sixth time this year, following a 'wait-and-see' approach due to uncertainty surrounding the Middle East conflict and its impact on the UK economy.

However, three members of the nine-person MPC - Huw Pill, Megan Greene, and Catherine Mann - voted to hike rates to 4% at the last meeting and are expected to do so again. The experts believe that this division among rate-setters will remain, with the 'doves' potentially accepting the possibility of future rate rises.

The UK Consumer Prices Index (CPI) inflation rose to 2.9% in July, while services inflation fell from 3.6% to 3.4%, indicating a lack of second-round effects. But economists predict that inflation will be pushed up when Ofgem's next energy price cap kicks in from October, causing household energy bills to rise by 4% for a typical dual-fuel household.