Bank of England's Lombardelli Signals Another Rate Rise Likely in Near Term — 2nd Update

By Paul Hannon

The Bank of England is likely to again raise its key interest rate in the near future, unless there is evidence of weakening inflation, deputy governor Clare Lombardelli said Tuesday.

The BOE last week raised its key rate for the first time since the start of the war between the U.S. and Iran, which has pushed energy prices sharply higher.

The central bank signaled that another rate rise is likely, although it pushed back against market expectations of a rise to 5% by the end of next year from 4% now.

"In the absence of evidence of weaker inflation pressures, I continue to think there is likely to be a case for a further increase in rates in the near term," Lombardelli said in a speech.

The central banker said there is a risk that inflation will be higher than forecast, with the BOE now seeing a peak at 4.9% in the second quarter of next year.

"The energy shock has lasted longer and become larger than expected, activity has been more resilient and recent data suggest that underlying disinflation may have stalled," she said.

Lombardelli said the BOE should change the key rate "gradually" rather than attempt to "anticipate today the full policy adjustment that will ultimately be needed to return inflation sustainably to target."

However, the central banker said it is possible that the BOE will lift borrowing costs at its next meeting in December.

"I don't rule out back-to-back changes, nor am I saying they are definitely on," Lombardelli said.

Energy prices have fallen since the results of U.S. elections last week were interpreted as increasing the likelihood of a peace deal.

In addition to uncertainty about the conflict, Lombardelli said future rate moves will depend on "how the combination of data on pricing, activity and slack come together alongside energy and related prices."

The state of the U.K. job market will be one factor affecting Lombardelli's votes over coming months. While the job market has been more resilient than policymakers had expected, hiring and firing has slowed and young people are struggling to find work.

"In setting monetary policy, I will continue to look beyond the headline numbers: at whether hiring is recovering, whether people can move towards the jobs available, and whether labor market weakness is genuinely easing wage and inflation pressures," she said.

The BOE views its key rate as already restraining economic activity, but Lombardelli said it is not clear how restrictive policy is given that the economy has grown more rapidly than policymakers had expected.

"Monetary policy has been less restrictive than we thought it was," she said.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

November 10, 2026 08:57 ET (13:57 GMT)