UK inflation undershoots again, easing pressure on Bank of England – for now
17 JUN, 2026
By Luke Bartholomew Bartholomew
UK inflation has once again come in below expectations, reducing the urgency for the Bank of England to raise interest rates – though the relief may prove short-lived as an energy price shock looms on the horizon.
Inflation Surprise Softens the Rate Hike Case
The latest UK inflation data has delivered another downside surprise, further diminishing the case for tightening monetary policy. According to Luke Bartholomew, Deputy Chief Economist at Aberdeen Investments, the figures should continue to ease the pressure on the Bank of England to raise rates this year.
That said, the MPC meeting later this week is unlikely to be entirely straightforward. Bartholomew notes that it is possible that a couple of MPC members will vote in favour of a rate hike tomorrow – a reminder that the committee remains divided, even as the headline data points towards restraint.
The Energy Price Warning
Despite the recent softening in energy costs, Bartholomew flags a significant near-term risk: the forthcoming revision to Ofgem's energy price cap. Although energy prices have come down recently, the UK will face increased inflationary pressure when the Ofgem price cap rises next month, he warns.
This means the Bank of England cannot afford to fully stand down. Policymakers will be watching closely for any second-round effects – specifically, whether higher household energy bills begin to feed into broader inflation expectations, which remain a key concern for a central bank still intent on anchoring price stability.
The Pivot Question Returns
The broader economic backdrop, however, offers some counterbalance. With the UK economy relatively subdued, the conditions for sustained inflationary pressure beyond energy look limited. This opens the door to a potential shift in market focus.
As Bartholomew puts it, 'given that the economy is otherwise relatively weak, it is plausible that speculation will start to focus again on when the central bank will cut rates rather than raise them.' The direction of travel for monetary policy, in other words, may be reversing sooner than the market has priced in.
For now, the Bank of England finds itself in a delicate position – data that argues for patience on the upside, but an energy shock that demands continued vigilance. The coming weeks, and the Ofgem adjustment in particular, will be critical in shaping the next chapter of the UK rate story.
Sources: Aberdeen Investments
