The Bank of England kept its base rate at 3.75 per cent but warned that prolonged Middle East-related energy volatility could force future increases. Governor Andrew Bailey said the current impact on UK prices and wages was limited, while the decision reflected concern that inflation could remain above the Bank’s 2 per cent target and add to pressure on households, borrowers and the Government.

This was the sixth consecutive meeting without a rate change, although three of the nine MPC members voted for an increase to 4 per cent. The Bank raised its forecast for inflation to about 3.75 per cent by the end of the year and 4 per cent in early 2027, while partly slowing quantitative tightening; meanwhile, lenders were increasing mortgage rates and the RAC warned diesel could exceed £2 a litre.