Bank of England faces pressure to raise rates amid inflation fears

Speaking before Parliament's Treasury Committee, Bailey pushed back against suggestions that the central bank has a predetermined path for borrowing costs. He told MPs: "The risks are on the upside, the risk particularly being with energy prices. What I want to dispel is the idea that we have a secret plan and we know where we are going to go to."

Megan Greene, an external MPC member who backed a rate rise at last month's vote, expressed her own unease about the instability in energy and commodity markets stemming from the ongoing Middle East conflict. "The conflict has been six months now so that worries me in terms of volatility down the line. We face such incredible uncertainty so, in my view, it is appropriate to take a risk management strategy and think about how you manage your losses," she told the committee.

Bailey added: "To state the obvious, the conflict is still going on and causing a high level of energy prices." He noted that significant price swings in energy markets are feeding through into broader financial conditions, and cautioned that current elevated energy costs may not represent the peak. "We have higher energy prices and they could be higher still," Bailey told MPs.

Interest rates in the UK currently stand at 3.75 per cent, with the Bank's Monetary Policy Committee (MPC) due to convene again on September 17, 2026, to determine whether borrowing costs should go up, remain unchanged, or be cut. Forecasters have broadly anticipated that rates will be raised at least once during the next twelve months, as expectations mount that inflation will edge higher. Financial markets are already pricing in tighter monetary policy, though Bailey stressed that such market pricing does not guarantee any particular outcome from the committee's deliberations.