Bank of England holds interest rates but warns energy prices could force a rise

The Bank of England kept Bank Rate at 3.75 per cent on 16 September 2026, but a divided vote and persistent energy-price pressures mean a rise to 4 per cent remains firmly on the table.

Three of the nine members of the Monetary Policy Committee voted to raise Bank Rate to 4 per cent at the September meeting — the sharpest signal yet that the hold is conditional. The six-to-three split, confirmed by the Bank of England, reflects a committee that’s watching energy markets closely and isn’t fully convinced the current rate is doing enough.

The numbers behind that concern are stark. UK gas prices rose 14.7 per cent in July 2026 compared with July 2025, according to the Office for National Statistics. Average petrol prices hit 156.8 pence per litre in April 2026. And Ofgem’s energy price cap for households in England, Wales and Scotland was reported to rise by 4 per cent at the start of October 2026. The Bank’s July 2026 Monetary Policy Report estimated that higher energy prices would contribute around 0.4 percentage points to CPI inflation in the second half of 2026 — but its April report had already flagged a larger figure of around 0.9 percentage points added to CPI by the third quarter of 2026, compared with its February projection.

So far, the Bank said, elevated energy costs had had a limited effect on UK price and wage-setting. But it warned that risk would grow if high prices persisted.

The CBI’s response to the September decision pointed in the same direction. According to a report of the CBI’s reaction, the case for keeping rates on hold would weaken if energy prices stayed high or climbed further — with firms’ pricing decisions and future wage settlements among the factors being watched.

The policy bind is a familiar one: higher interest rates can push inflation down by cooling demand, but they also push up borrowing costs for households and businesses already squeezed by energy bills. The Bank said its monetary policy was being set to return inflation sustainably to its 2 per cent target while the economy adjusted to the energy shock. The next scheduled rate decision is 5 November 2026.