UK Interest Rates May Hit 4% Amid Energy Crisis

Goldman Sachs has updated its forecast for interest rates in the UK, warning that they could jump to 4% before the end of the year. The investment bank cited surging global energy prices as a key driver behind this prediction. Brent crude oil prices have surged past $108 per barrel following drone strikes on Saudi Arabian oil infrastructure.

The Bank of England's Monetary Policy Committee is set to meet this Thursday, where policymakers are expected to keep the base rate steady at 3.75%. However, economists warn that this pause may be temporary, with growing expectations that the central bank could raise rates in November.

Rising energy costs are driving inflation fears, with UK households facing a four percent increase in the energy price cap in October and another potential nine percent increase anticipated in January. The current inflation rate stands at 2.9%, up from 2.6% in June, and analysts expect it to continue accelerating.

Lenders have already increased their fixed-rate deals over the past week, pushing mortgage borrowing costs to nearly five-month highs. The average two-year fixed mortgage has climbed to 5.67%, while the average five-year deal stands at 5.72%.