🇬🇧 Bank of England Faces Pressure as Energy Prices Revive Inflation Fears

The Bank of England (BoE) is expected to leave its benchmark interest rate unchanged at 3.75% at its upcoming policy meeting, despite renewed inflation concerns caused by surging energy prices and escalating conflict in the Middle East. Oil prices have risen sharply, with Brent crude recently moving above $100 a barrel, increasing concerns that higher fuel and energy costs could feed into UK consumer prices and prolong inflationary pressures. The latest market shift has increased expectations of a possible BoE rate increase later in 2026. Reuters reports that traders now see roughly a 30% probability of a 25-basis-point hike at the September meeting, while expectations for a November increase have strengthened. Goldman Sachs has also revised its forecast and now expects a 25-basis-point hike in November. At the same time, the central bank is expected to slow the pace of quantitative tightening (QT). The BoE has reduced its bond holdings substantially since beginning QT in 2022 and is expected to reduce annual gilt sales from £70 billion to around £50 billion for the coming year. The policy dilemma is becoming increasingly difficult: raising rates could help prevent an energy-driven inflation shock from becoming entrenched, but maintaining restrictive monetary policy for longer could weaken economic growth and increase borrowing costs for households and businesses. The BoE's own analysis has previously warned that higher global energy prices can feed directly into UK inflation and indirectly raise costs throughout supply chains. Source: https://www.reuters.com/business/bank-england-set-hold-rates-steady-slow-qt-2026-09-14/?utm_source=chatgpt.com