Arya News Agency -LONDON – Bank of England Governor Andrew Bailey told parliament on Tuesday that rising energy costs remain the single biggest threat to Britain's economy, as Brent crude surged past $99 a barrel – pushing UK inflation to exceed previous forecasts by a full percentage point in the final quarter.
Bailey, testifying before the Treasury Committee on the inflationary impact of the Iran conflict, said "energy prices have gone up and could go up further," adding that mortgage rates have risen by roughly 75 basis points since the hostilities began – the sharpest increase among G7 nations.
Gas prices hit 188 pence per therm, the highest since January 2023, while two-year fixed mortgage rates reached 5.65% and five-year deals stood at 5.70%.
Monetary Policy Committee member Megan Green warned that prolonged energy shocks risk triggering second-round inflationary effects – feeding into wages and broader goods and services prices. Alan Taylor noted that markets had expected two or three rate cuts this year, but the base rate has remained unchanged at 3.75%.
The BoE previously estimated that direct and indirect energy cost impacts could push Q4 2026 inflation more than one percentage point above pre-conflict projections. The central bank has described developments in West Asia and their effect on energy prices as the "dominant source of uncertainty" in the UK inflation outlook.