Interest rates held but Bank signals rise if energy prices stay high — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Bank of England held interest rates at 3.75% for the sixth consecutive meeting, even as official figures showed inflation rising to 3.1% in August from 2.9% in July.
- Governor Andrew Bailey warned that continued energy price volatility tied to the US-Israel conflict with Iran makes a rate rise more likely to return inflation to the 2% target.
- The Monetary Policy Committee split 6-3, with three of nine members voting to raise the base rate to 4% while the other six voted to hold.
- The Bank forecast the January household energy price cap will rise "substantially further" and upgraded its July-September growth projection from 0.1% to 0.4%.
- Bank of England economists cut their year-end food inflation forecast to 4% — well below the 6-7% projected in July — citing limited spillover from energy costs into other prices.
- The Bank paused its quantitative tightening programme, halting annual government bond sales and instead offloading its £488bn stockpile in smaller tranches over eight years.
Why it matters: UK households face a squeeze on two fronts: the Bank's own forecast says January's energy price cap will rise "substantially further," while three of nine MPC members voted to raise rates to 4% at this round. The 6-3 split means a single upward inflation surprise — already at 3.1% in August — pushes the Bank closer to hiking.
Ask SkimNews
