# Bank of England holds rates but warns of war-driven rises ahead

> The central bank keeps borrowing costs steady at 3.75% while signalling future increases if Middle East conflict pushes inflation higher.
- Title: Bank of England holds rates but warns of war-driven rises…
- Summary: The central bank keeps borrowing costs steady at 3.75% while signalling future increases if Middle East conflict pushes inflation higher. Interest rates will…
- Keywords: bank of england, interest rates, monetary policy, inflation, middle east war, energy prices, quantitative tightening, andrew bailey, uk economy, news, world, Bank
- Source: the Guardian — https://theguardian.com/business/2026/sep/17/bank-of-england-holds-interest-rates-inflation
- Published: 2026-09-17T12:04:07+00:00
- Read time: 1 min
- Topics: bank of england, interest rates, monetary policy, inflation, middle east war, energy prices, quantitative tightening, andrew bailey, uk economy, news, world
## Bank holds rates steady at 3.75%
The Bank of England's monetary policy committee voted six to three to keep interest rates unchanged, as financial markets had expected.
## War could force rates up soon
The Bank warned that prolonged Middle East fighting could dramatically raise the chance of future rate increases to combat inflation.

> the longer this volatility persists, the bigger the impact it will have on inflation
## Energy prices pushing inflation higher
Inflation rose to 3.1% in August as war-driven energy costs hit households. The Bank expects inflation to reach 4% by early next year.
## Rate rises likely from November
City traders predict a quarter-point increase in borrowing costs as early as November, with three more rises to 4.75% expected through next year.
## No wage spiral yet, so Bank waits
The Bank said there's little evidence of workers and businesses demanding higher pay and prices, so it doesn't need to act on rates immediately.
## Fed and ECB already raising rates
The US Federal Reserve raised rates on Wednesday for the first time since 2023, and the European Central Bank recently increased eurozone borrowing costs.
## Bank to sell bonds back to Treasury
In a surprise move, the Bank plans to sell 146 billion pounds of government bonds to the Treasury at about 20 billion pounds per year until 2034.
## Bond plan needs chancellor approval
The Treasury's Debt Management Office would issue shorter-term debt to cover the buyback. Chancellor John Healey must sign off on the deal next April.
## Productivity growth offers budget boost
The Office for National Statistics upgraded its UK productivity growth estimates, providing a positive backdrop as the government prepares next month's budget.
## Key takeaway

Interest rates will likely rise from November onwards if energy prices stay volatile, but the Bank isn't acting yet because wage pressures haven't taken hold.