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BoE warns of interest rates pain as inflation spikes
Bank of England holds rates but warns of rising costs amid Labour's winter of discontent.
In brief
Bank of England holds rates but warns of rising costs amid Labour's winter of discontent. Bank of England keeps interest rates steady at 3.75% but warns inflation could reach 4% by early 2027 due to Middle East conflict and energy prices. Originally reported by Dailymail.
Bank of England decision
The Bank of England kept interest rates steady at 3.75% in its latest Monetary Policy Committee meeting.
Inflation concerns
Governor Andrew Bailey warned rising global energy costs could push UK inflation to 4% by early 2027.
Middle East impact
The Bank cited Middle East conflict as the main source of inflation uncertainty for the UK economy.
Quantitative tightening
The Bank partially suspended quantitative tightening to slow asset unwinding from previous credit crunch measures.
Gilts market reaction
Yields on government gilts fell to monthly lows after the Bank's decision to slow quantitative tightening.
Global central bank moves
The Federal Reserve and European Central Bank have already raised rates, while the Bank of Japan is expected to follow.
Energy price impact
RAC warns diesel could exceed £2 per litre in the coming days due to rising oil costs.
Inflation forecast
The Bank expects UK inflation to rise to 3.75% by year-end and peak at 4% early in 2027.
Chancellor's budget
Chancellor John Healey may hike taxes again at the upcoming Budget amid rising public finances.
MPC voting split
Three MPC members voted to raise rates to 4% while the majority kept rates steady at 3.75%.
Energy price cap
Ofgem's next energy price cap will increase household bills by 4% for dual-fuel households from October.
Economist warnings
Suren Thiru said the Bank chose patience over panic to balance energy shocks against inflation risks.
Nigel Green's warning
Nigel Green warned the Bank of England is choosing stillness while inflation runs hot, risking economic damage.
August inflation data
UK headline CPI inflation rose to 3.1% in August, marking a five-month high.
Services inflation
Services inflation remained at 3.4% in August, indicating no second-round price effects.
Next steps
The Bank may raise rates in November if energy prices continue to rise sharply.
What to remember
Bank of England keeps interest rates steady at 3.75% but warns inflation could reach 4% by early 2027 due to Middle East conflict and energy prices.
