Interest rate reaction: Britain faces most expensive winter since energy crisis began, IPPR warns

Responding to the latest MPC decision, William Ellis, senior economist at IPPR, said:

“At the start of the year, markets expected the Bank of England to cut interest rates twice in 2026. The conflict in Iran has reversed those expectations. The Bank held rates steady today and kept the door open to future increases if the energy shock leads to more persistent inflation. Markets now expect a rate rise before the end of the year.

“This means Britain is heading towards what is likely to be its most expensive winter since 2022/23. Families could be hit twice: first through higher energy bills, and then through higher mortgage repayments if the Bank raises rates later this year.

“If the conflict does not de-escalate quickly, the government should use the Autumn Budget to announce a temporary ceiling on household energy bills. This would protect families, tackle inflation at source and reduce the risk that a temporary energy shock becomes a lasting blow to living standards and economic growth.”