30th Apr 2026 12:18
(Alliance News) - The Bank of England on Thursday said it stands "ready to act" should soaring energy prices impede progress towards its 2% inflation target.
The BoE's Monetary Policy Committee voted 8-1 to leave bank rate on hold at 3.75%. BoE Chief Economist Huw Pill put the case for a quarter point rate increase to 4.0%.
The central bank last cut rates in December, keeping rates on hold at its February and March meetings.
In a statement, the MPC said the conflict in the Middle East means that prospects for global energy prices are highly uncertain.
While monetary policy cannot influence energy prices it "will be set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably," the statement added.
"The policy stance required to achieve this will depend on the scale and duration of the shock, and how it propagates through the economy," it continued.
The MPC highlighted the risk of "material" second-round effects in price and wage-setting, which policy would need to lean against, while accepting loosening labour market and a weakening economy could contain inflationary pressures.
"Taking all the risks to the economic outlook into account, the Committee judges that it is appropriate to maintain Bank Rate at this meeting," the MPC said.
The MPC said it stands "ready to act" as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term.
Because of the high degree of unpredictability stemming from the conflict in Iran, the bank laid out three scenarios based on different paths for energy prices and second-round inflation effects.
BoE Governor Andrew Bailey said if "second-round effects are likely to be greater, policy should focus on returning inflation back to target more quickly."
While Pill said is it "clear" that higher energy prices represent an inflationary shock to the UK economy.
"Second-round effects in price and wage-setting stemming from this shock have the potential to raise UK inflation beyond the near term in a persistent manner," he added.
"As someone already concerned about a stalling of the underlying disinflation process even before the latest energy price shock, a prompt but modest hike in Bank Rate will help mitigate upside risks to price stability stemming from a re-emergence of intrinsic inflation persistence," Pill added.
A press conference with BoE Governor Andrew Bailey follows at 1230 BST.
By Jeremy Cutler, Alliance News reporter
Comments and questions to [email protected]
Copyright 2026 Alliance News Ltd. All Rights Reserved.