---
title: "Investec economist sees higher probability of Bank of England rate hikes"
publisher: "Stockmark.IT"
author: "Stockmark.IT Website"
published: "2026-09-29T05:51:01+00:00"
modified: "2026-09-29T05:51:01+00:00"
date: 2026-09-29
canonical: "https://stockmark.it/the-monetary-policy-has-changed-its-mindset-whats-next-for-interest-ra/"
category: "Banking"
categories: ["Banking", "Economy"]
image: "https://i0.wp.com/stockmark.it/wp-content/uploads/2026/09/investec-economist-sees-higher-probability-of-bank-of.png?fit=1536%2C1024&quality=80&ssl=1"
format: "news"
language: "en-GB"
---

# Investec economist sees higher probability of Bank of England rate hikes

**Published:** September 29, 2026
**Author:** Stockmark.IT Website
**Categories:** Banking, Economy
**Featured image:** ![Investec economist sees higher probability of Bank of England rate hikes](https://i0.wp.com/stockmark.it/wp-content/uploads/2026/09/investec-economist-sees-higher-probability-of-bank-of.png?fit=1536%2C1024&quality=80&ssl=1)

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Philip Shaw, chief economist at Investec, has indicated that a rise in interest rates now appears more probable following a shift in the collective thinking of the Bank of England’s Monetary Policy Committee. The committee voted six to three to maintain the Bank rate at 3.75% earlier this month, a decision that mirrored the voting pattern from July 2026. While three dissenters had advocated for a quarter-point increase, the majority’s stance suggested a growing recognition of rising inflationary risks. Four members who supported the policy hold, including Governor Andrew Bailey, acknowledged that upside risks to inflation had increased since the summer. This group also appeared less certain that rates should remain on hold, signalling a potential change in the committee’s approach to monetary policy.

Shaw notes that interest rate adjustments influence economic activity and inflation with a lag, typically building to their full effect over two to three years. Consequently, there is no immediate mechanism for the committee to return consumer price index inflation, currently at 3.1%, to its 2% target in the short term. The focus is instead on the medium-term outlook, where two factors are becoming increasingly significant. The first is the ongoing conflict in Iran, which has persisted for seven months. Although energy prices have fluctuated, they remain well above pre-crisis levels. Brent crude oil has averaged approximately $95 a barrel, compared with $69 in February, with current prices exceeding $100. Each additional week of tension in the Middle East contributes to higher costs for petrol and business energy. These expenses may be passed on to consumers, intensifying broader inflationary pressures. Furthermore, sustained high inflation could accelerate pay growth, creating a feedback loop where firms pass higher wage costs to consumers. If this scenario unfolds, the Bank would need to adopt a more aggressive stance against entrenched inflation, potentially leading to greater economic volatility.

The second factor involves the Bank’s baseline forecast, which projected inflation returning to 2.0% by the first quarter of 2028. This outlook relies heavily on falling energy prices. A delay in an agreement between the United States and Iran could keep inflation elevated for longer. This would be problematic given that UK inflation has remained above the 2.0% target for the past five years, excluding a brief three-month period. Another prolonged overshoot could damage the committee’s credibility, a concern that is particularly acute given the current nervousness in bond markets. A renewed inflation scare would likely push longer-term borrowing costs higher. Against this backdrop of geopolitical uncertainty and fragile financial conditions, Shaw argues that a rate increase at the next meeting in early November is now more likely. A second increase could follow in February. These moves should be viewed as insurance against worse inflationary outcomes, allowing the committee to tighten policy less aggressively later if needed. Conversely, if the conflict ends soon, the committee could effectively cancel this insurance, allowing interest rates to resume their downward path later next year.

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