Bailey says Bank of England will not rush on rates amid energy shock

Andrew Bailey signalled that the Bank of England will move cautiously as the war-driven energy shock ripples through prices, wages and demand, warning that policymakers are not ready to lock in a rate response while the outlook remains so uncertain. Speaking in Washington during the IMF spring meetings, Bailey said higher oil and gas costs would feed into inflation, but the path from the conflict to the British economy was still too unclear for a quick judgment.

His message matters for households and markets because Bank Rate already stands at 3.75%, and another move would directly affect mortgages, business loans and savings rates. The Bank left rates unchanged at its March 18 meeting, when the Monetary Policy Committee said conflict in the Middle East had triggered a significant rise in global energy and other commodity prices. In its March materials, the Bank also said inflation would be higher than expected this year because of those energy costs.

The central bank’s own forecasts now point to renewed price pressure in the months ahead. It says consumer price inflation is likely to run between 3% and 3.5% in the second and third quarters of 2026, well above the level expected before the conflict. That creates a difficult balance: move too fast and the Bank could deepen the squeeze on borrowers and firms already facing higher utility, transport and input costs; move too slowly and inflation expectations could drift higher just as the shock works its way through the economy.

Bailey said, “There’s really difficult judgements to be made,” and said the Bank was “not going to rush to judgements” because the risks are still evolving. The next rate decision is due on April 30, giving policymakers another chance to judge whether the energy shock is feeding mainly into a temporary price spike or a broader inflation problem.

The wider backdrop is equally uncomfortable. The International Monetary Fund has cut its growth outlook and warned the world economy could edge toward recession if the conflict worsens and oil stays above $100 a barrel through 2027. In a severe scenario, the fund sees oil averaging $110 a barrel in 2026 and $125 in 2027. Bailey’s caution suggests the Bank is trying to preserve room to react as those risks unfold, rather than pre-committing to tighter policy before the inflation hit and the growth damage are fully visible.