Economic Buzz: Bank of England keeps key interest rate unchanged at 3.75%, revises inflation forecast upward

The Bank of England (BOE) kept its key interest rate unchanged at 3.75% on Thursday. However, it has revised its inflation forecast upward, projecting it will hit around 4% in early 2027, compared with the 3.1% recorded last month. The bank cited the prospect of another rise in domestic energy bills as a key driver of that projection. BOE noted that protracted conflict in the Middle East has contributed to further increases in crude and refined energy prices since the previous meeting, which remain more volatile and higher than pre-conflict. UK CPI inflation increased to 3.1% in August and is likely to rise further over coming quarters. Monetary policy is being set to ensure inflation comes down to 2% sustainably as the economy adjusts to the energy shock. The policy stance required to achieve this will depend on the scale and duration of the shock and how it propagates through the economy.

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