Bank of England official flags UK economy's unexpected energy-shock resilience
Bank of England Deputy Governor Sarah Breeden said she was surprised by the UK economy's resilience to recent energy shocks. She warned that a prolonged energy shock could still require higher interest rates because of inflation risks. Markets are pricing a 25 basis point increase at the November meeting, and the BoE remains focused on incoming data.
Sarah Breeden, the Bank of England’s Deputy Governor for Financial Stability, said she did not expect the UK economy to withstand recent energy-price disruptions so well. Although GDP growth has been modest, she cautioned that if energy costs stay elevated, inflation pressures might force the central bank to raise borrowing costs.
Investors currently expect a quarter-point increase at the November policy meeting. Breeden’s comments imply the BoE will keep watching inflation, wage growth, and geopolitical developments that affect energy prices before deciding. The article also notes risks that inflation could persist beyond the initial energy price move.
If the BoE raises rates, households with variable mortgages or loans could face higher repayments, while some savers may see better returns. Businesses may delay investment if borrowing becomes costlier. Persistent energy-driven inflation could squeeze budgets, especially for lower-income households, though the economy’s resilience may soften broader disruption. The eventual effect depends on data and policy choices.