Bank of England’s Lombardelli warns energy shocks may force policy response as UK inflation climbs

Sarah Breeden, Deputy Governor of the Bank of England, is threading a very specific needle: acknowledging that energy prices are pushing UK inflation higher while insisting the central bank won’t reflexively reach for the rate hike lever every time Brent crude ticks up. The inflation picture is getting uncomfortable UK CPI inflation sat at 3.1% in August 2026. That number is projected to climb to roughly 3.7% by the fourth quarter and could hit 4.2% by the first quarter of 2027. For a central bank that targets 2%, those figures represent more than a minor inconvenience. The proximate cause is familiar. Ongoing conflicts in the Middle East have sent energy prices on a volatile ride, with petrol prices jumping from approximately 132p to 172p per litre by September 2026. The Bank Rate stood at 3.75% as of September 2026. Markets have begun pricing in two to three quarter-point hikes, which would push rates toward the 4.25% to 4.50% range. Why Breeden says this isn’t 2022 Breeden stated in March 2026 that the current environment is materially different from the energy crisis triggered by Russia’s invasion of Ukraine in 2022. Several factors underpin that distinction. The labor market h...