A rise in interest rates by the Bank of England is becoming more likely if energy prices remain high, according to Clare Lombardelli, a deputy governor at the central bank. Speaking during a speech in Warsaw, she explained that persistent high energy costs could push the Bank to adopt tighter monetary policies unless the broader economy shows signs of weakness. Earlier this month, Lombardelli was part of a majority that voted to keep UK interest rates at 3.75%, a level intended to curb inflation and stabilize the economy. Inflation rose to a five-month high of 3.1% last month, moving further away from the Bank’s target of 2%. Experts predict that inflation will continue to rise in the coming months as higher energy costs gradually affect consumer spending and business operations. Households are expected to face a roughly 4% increase in the energy price cap starting next week, which could add to financial pressure. The Bank has forecast that inflation will reach approximately 3.7% by the end of this year and could climb to 4.2% by the first quarter of 2027. Lombardelli emphasized that the longer high energy prices remain, the greater the risk that inflation expectations and wage demands could shift, leading to broader price increases. She noted that while the immediate energy price is important, it is the interaction between the energy costs, the economy, and how those costs are passed on to other goods and services that will determine whether the Bank needs to raise interest rates. She added that the longer the energy shock lasts, the more likely it is that these costs will be reflected in other areas of the economy. There is still uncertainty about how large and long-lasting the energy price shock will be and how it will affect the economy. However, as the shock grows and continues, the Bank is likely to see more of these higher energy costs passed on to other prices. Lombardelli also highlighted that food prices could rise as manufacturers pass on their increased energy costs to consumers. While food inflation recently hit a two-year low of 1.3%, the Bank predicts it will rise to around 4% by the first quarter of next year.