Bank of England governor warns of higher costs ahead despite falling oil prices
9 reported
Bank of England Governor Andrew Bailey has warned UK consumers to expect higher costs this year due to the Middle East conflict, even as oil prices fall following a US-Iran peace deal. Speaking after the Bank held interest rates at 3.75%, Bailey said there is “still some inflationary pressure in the pipeline” from higher energy prices. Seven of the nine-member Monetary Policy Committee voted to keep rates unchanged, while two members voted for an immediate quarter-point rise. The Bank now expects UK inflation to reach about 3.25% in the final quarter of 2026, lower than previously forecast but still above the 2% target. Bailey said tolerating temporarily above-target inflation is appropriate given economic softness and uncertainty around energy price shocks. The pound fell to a 10-week low against the dollar after the announcement.
What’s reported
The Bank of England held interest rates at 3.75%.
Seven MPC members voted to hold, two voted for a quarter-point rise to 4%.
UK inflation was 2.8% last month, more muted than feared.
The Bank now expects CPI to rise to about 3.25% in Q4 2026.
Oil prices have fallen after the US and Iran signed an initial peace deal.
Bailey said higher energy prices over the past four months mean “inflationary pressure in the pipeline.”
The pound fell to a 10-week low of $1.32 against the dollar.
UK job vacancies fell to their lowest level in five years.
The Federal Reserve held US rates at 3.5% to 3.75%.
Key figures
Andrew Bailey, Governor of the Bank of England
Megan Greene, independent MPC member
Huw Pill, Bank of England chief economist
Kevin Warsh, Federal Reserve chair
Sources: The Guardian
