BoE’s Bailey Warns High Energy Prices Could Force Rate Hikes

Bank of England Governor Andrew Bailey warns high energy prices make it harder to keep rates on hold. New analysis shows rising risks for inflation.

Editorial Desk

September 26, 2026 One Min Read

POLICY WIRE — London, United Kingdom — Bank of England Governor Andrew Bailey has warned that persistently high energy costs are making it increasingly difficult for the central bank to maintain current interest rates, signaling a shift in tone toward potential rate increases.

In a speech delivered in Oxford, Bailey emphasized that prolonged elevated energy prices could complicate efforts to keep borrowing costs unchanged, despite current signs of subdued inflation pass-through. He highlighted the growing risk that energy costs could influence inflation expectations and wage-setting behavior over time.

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Deputy Governor Clare Lombardelli also addressed the issue, stating that while monetary policy should not react mechanically to energy prices, the central bank must remain vigilant against the indirect effects of sustained high energy costs. Financial markets now estimate a 75% chance the BoE will raise rates by a quarter point at its next meeting in November.

Reporting by Policy-Wire (PW)

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