Britain Likely to Resume Rate Hikes After Energy Shock

The rise in energy prices in Britain is now raising concerns at the Bank of England, with the increasing likelihood that the shock could lead to a sustained wave of inflation. Inflation stood at 3.1% in August, driven by rising fuel, gas, and electricity prices, and natural gas prices have increased by 50% since July. The bank expects inflation to climb above its target of 2% by early 2027 if energy prices remain high without government measures to alleviate them, which could prompt the bank to raise interest rates more aggressively—especially as the risks of sustained inflation grow and market expectations shift to six possible interest rate hikes in November and another in February.

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