Rate rise ‘increasingly likely’, warns Bank of England official

By the Editorial Team · Friday, September 25, 2026

Bank of England Deputy Governor Clare Lombardelli indicated that interest rate hikes are becoming more likely if high energy prices persist, due to their potential to fuel inflationary pressures. Her warning highlights the risk of entrenched inflation driven by sustained energy costs and uncertain food price developments, suggesting further monetary tightening may be necessary.

A senior Bank of England official has signaled that interest rate increases are becoming more probable if elevated energy prices persist. Clare Lombardelli, the BoE’s deputy governor responsible for monetary policy, issued the warning during a conference in Warsaw, highlighting concerns over the potential for higher inflation driven by sustained energy cost pressures.

Lombardelli acknowledged that businesses have so far demonstrated a “surprising ability” to absorb the rising energy expenses linked to geopolitical developments in Iran. However, she cautioned that this resilience has limits. The direct impact of increased energy costs is expected to contribute to rising inflation expectations, wage demands, and pricing pressures, which could trigger broader inflationary effects in the economy.

She stated that the critical issue is not whether secondary inflationary effects are visible in current data, but whether the conditions leading to these effects are becoming more entrenched. In the event that elevated energy costs continue and there is no clear evidence of disinflation or weakening economic activity, monetary policy will likely need to tighten.

Lombardelli’s remarks contrast with the assessment from the Organisation for Economic Co-operation and Development (OECD) earlier this week. The Paris-based body argued that the United Kingdom’s monetary policy stance is already sufficiently restrictive to curb inflation, noting that the UK faces different circumstances compared to the United States and the Eurozone in addressing energy-related shocks.

Nonetheless, Lombardelli’s comments align with the Bank of England’s recent more hawkish tone. Last week, the BoE kept interest rates steady at 3.75 percent, but three members of its Monetary Policy Committee voted for an immediate increase. Governor Andrew Bailey also signaled that tighter policy may be necessary, depending on ongoing volatility in energy markets.

Beyond energy prices, Lombardelli drew attention to the uncertain outlook for food inflation. She cited factors including elevated energy costs, drought conditions, disruptions in fertilizer supply chains, and the heightened risk of extreme weather events associated with El Niño. These elements add further complexity to the inflation outlook and may influence future monetary policy decisions.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.