BoE Hold Expected, Energy Revives Hike Bets

The Bank of England is widely expected to keep its benchmark rate at 3.75% at its September meeting, despite rising pressure to tighten policy later this year. UK inflation reached 3.1% in August, driven partly by higher energy costs, while core and services inflation and a cooling labor market give policymakers reasons to remain cautious. Financial markets are pricing in an increased chance of a quarter-point rate hike in November, as oil and natural-gas prices rise and the U.S. Federal Reserve resumes tightening, but most economists still expect the Bank Rate to remain unchanged through 2026. The policy debate centers on whether the energy shock will fade or spill over into wages, services prices and inflation expectations. Investors are also watching the Bank’s plans to reduce its balance sheet, including possible changes to gilt sales that could affect financial conditions ahead of the government’s budget.