After the policy decision, Governor Bailey said the Bank of England stands ready
to adjust policy as the outlook changes. There is currently little sign that
recent energy-price rises have become embedded and no evidence yet of
second‑round inflation, but the risk cannot be ruled out and the BoE will remain
vigilant. If the conflict persists and boosts inflationary pressure, the BoE may
need to raise rates further. Bailey expects energy’s indirect effect to lift
inflation by about 0.5 percentage point in H2 2026, but the pass-through is
Domestic inflation is occurring more slowly than in the April forecast. Domestic inflation is broadly
easing; household inflation expectations have eased but remain elevated. The
latest CPI print was below the BoE’s expectation, a welcome sign that inflation
is continuing to fall.
