Despite inflation rising to 3.1% in August, the Bank of England's Monetary Policy Committee is widely expected to keep interest rates steady at 3.75% during its upcoming meeting.
Key facts
- •August inflation reached 3.1%, up from 2.9% in July.
- •The Bank of England maintains a 2% inflation target.
- •Ofgem's energy price cap increase in October will raise typical dual-fuel bills by 4%.
- •Average two-year fixed residential mortgage rates have climbed to 5.77%.
- •The US Federal Reserve recently raised its interest rates to a range of 3.5% to 3.75%.
The Bank of England's Monetary Policy Committee (MPC) is expected to hold interest rates at 3.75% during its meeting on Thursday. This decision would mark the sixth consecutive time the committee has kept rates unchanged since December, despite official figures showing inflation rose to 3.1% in August from 2.9% in July.
By the numbers
Inflation Trends and Economic Outlook
The recent increase in the Consumer Prices Index (CPI) represents a multi-month high, moving further from the Bank's 2% target. Analysts attribute the rise to increased costs for petrol, diesel, and airfares. Economists warn that inflation is likely to climb further, with projections suggesting it could peak near 4% in early 2027 as higher energy and food costs filter through supply chains. An upcoming adjustment to the Ofgem energy price cap in October is expected to increase bills for typical dual-fuel households by 4%.
MPC Policy and Market Impact
While a majority of the nine-person committee is expected to favor a 'wait-and-see' approach, three members previously voted to hike rates to 4%. Policymakers are balancing inflation concerns against the potential impact on employment and the broader economy, including the effects of the Middle East conflict and rising Brent crude oil prices. Meanwhile, lenders have begun repricing fixed-rate mortgages upward in anticipation of future market shifts, with average two-year and five-year fixed rates reaching their highest levels in months.
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This article was independently rewritten by ManyPress editorial AI from reporting originally published by BBC Business, Evening Standard Business.
