# Burnham's cost of living promise faces rate rise reality

> The PM's pledge of breathing space is threatened by Middle East conflict pushing inflation and interest rates higher.
- Title: Burnham's cost of living promise faces rate rise reality
- Summary: The PM's pledge of breathing space is threatened by Middle East conflict pushing inflation and interest rates higher. Andy Burnham's cost of living measures…
- Keywords: andy burnham, bank of england, interest rates, inflation, cost of living, iran conflict, oil prices, uk economy, monetary policy, government borrowing, news, world
- Source: the Guardian — https://theguardian.com/business/2026/sep/17/andy-burnham-bank-interest-rate-rises-inflation
- Published: 2026-09-17T13:25:15+00:00
- Read time: 1 min
- Topics: andy burnham, bank of england, interest rates, inflation, cost of living, iran conflict, oil prices, uk economy, monetary policy, government borrowing, news, world
## Burnham promises breathing space
The new PM kicked off with modest cost of living measures like capping bus fares and slashing VAT on electricity bills.
## Middle East war reignites oil shock
The resumption of the Iran conflict has pushed global oil prices back above one hundred dollars a barrel, with painful effects across Europe and Asia.
## UK inflation jumps to 3.1%
August inflation hit 3.1%, driven by rising fuel prices, and the Bank of England now expects inflation above 4% in the first quarter of 2027.
## Bank signals future rate rises coming
The Bank of England held rates at 3.75% but warned that if Middle East conflict persists, policy may have to tighten with future rate increases.

> If the conflict in the Middle East persists for an extended period, as appears to be the case, it is likely that policy may have to tighten.
## Mortgage rates already jumping
Even without a rate rise from the Bank, mortgage rates have already jumped as markets contemplate a period of higher inflation.
## Double squeeze on government spending
Higher inflation threatens to overwhelm the benefits of Burnham's handouts, while higher interest rates on government borrowing increase the costs of future consumer protection measures.
## Key takeaway

Andy Burnham's cost of living measures risk being overwhelmed by rising inflation and higher government borrowing costs driven by geopolitical tensions.