London Daily

Focus on the big picture.
Wednesday, Sep 16, 2026

It's clear the Bank of England thinks we are at - or near to - a peak in interest rates

It's clear the Bank of England thinks we are at - or near to - a peak in interest rates

Alongside its interest rate decision today - another half percentage point increase which takes the cost of borrowing to 4% - the Bank of England introduced some subtle shifts in its language.
Back in the Soviet era, analysts would spend hours trying to read between the lines of the speeches and comments coming out of the Kremlin.

Was there a hint buried in this or that paragraph about nuclear policy and the path of the Cold War?

Today, economists do much the same thing with the noises coming out of the world's central banks.

The men and women who run monetary policy and decide our interest rates tend to talk in convoluted sentences. But spend enough time analysing those words and this modern form of Kremlinology can pay dividends.

Today is one of those days, because if you read between the lines of the latest pronouncements from the Bank of England, it's clear that we are reaching (or might have already reached) the peak for UK interest rates. About time too, you might say.

Alongside its interest rate decision today - another half percentage point increase which takes the cost of borrowing to 4% - the Bank introduced some subtle shifts in its language.

Words like "forcefully" have been removed from the part of the minutes talking about future rate increases. Future tenses have been replaced with conditional tenses.

We've never seen quite such a rapid rise of borrowing costs in this country - and note that while 4% might seem low in comparison to previous eras (it was in the double digits in much of the 1970s and 1980s) the impact on households is severe.

Today's mortgage holders are significantly more burdened with debt than their parents and grandparents.

And rates are, alongside inflation, higher energy costs, a diminishing workforce and the economic friction of Brexit, part of the explanation for why the economic outlook remains so lacklustre.

Significantly less miserable than last time

The Bank's forecasts today are significantly less miserable than they were last time it looked at the economy, thanks in large part to the fact that wholesale energy prices have dropped sharply.

While the Bank still expects a technical recession (in other words, two or more successive quarterly falls in gross domestic product), this would be the shallowest recession in modern history. Better to think of it as a flatlining economy.

But flatlining is not especially good either. And the real concern from the Bank's forecast is that Britain is projected to flatline for a long time to come.

By 2026, the Bank reckons total national income may still be below where it was in 2019.

Clearly this is not good news. And while many other countries around the world are facing similar challenges to the UK - in particular higher prices - one of the great conundrums is why the UK seems to be, if not an outlier, then particularly badly affected.

Is it Brexit? Is it that our economy was particularly badly scarred by COVID? Is it the fact that we are especially sensitive to higher energy costs?

The short answer is probably all of the above. But there are no simple answers here.

The Bank's forecast today does not provide any fresh answers; but nor does it provide any fresh reassurance.
Newsletter

Related Articles

0:00
0:00
Close
Police Tighten Public-Order Measures After Anti-Immigration Protests in Dover and Portsmouth
UK Ministers Pressed for Answers After US Diplomat Accused of Child Abuse Images Leaves Britain
Jaguar Land Rover Pursues NATO Defense Contracts for Defender Vehicles
British Service Member Dies in Road Accident While Deployed in Ukraine
George Osborne Calls for Britain to Rejoin EU Customs Union
Anthropic Chief Dario Amodei Urges Faster UK Action on Advanced AI Risks
UK State Pension Set for 3.9% Rise Under Triple Lock
UK Labour Market Cools as Payrolled Employment Continues to Decline
Reform UK’s £72 Million in Donations Faces Scrutiny Under Proposed Retrospective Funding Rules
UK Doctors Warn Expanded Pharmacy First Scheme Could Put Patients at Risk
British Airlines Cut Short-Haul Capacity as Jet Fuel Costs Rise
UK News Publishers Forecast 40% Search Traffic Drop as AI Overviews Expand
Axel Springer Wins Approval for £575 Million Daily Telegraph Acquisition
London Mayor Sadiq Khan Opposes Heathrow Third Runway Over Climate Targets
Scotland, Wales and Northern Ireland Leaders Hold Summit Seeking Greater Autonomy
UK Energy Price Cap Set to Rise to £1,723 in October
UK Treasury Warns Middle East Conflict Is Threatening Economic Growth
Labour Moves to Retrospectively Cap Overseas Political Donations After Reform UK Funding Surge
HMRC Warns Nearly Seven Million Adults Are Unclear About State Pension Entitlements
UK Parliament Passes Sovereign Grant Reform Before Conference Recess
British Rail Passengers Gain Automatic Right to Switch Operators During Disruptions
Burnham Hosts Downing Street Business Summit as UK Fiscal Pressure Builds
Labour Government Moves to Challenge £72 Million in Reform UK Crypto Donations
UK Advertising Industry Warns Wider Junk Food Rules Could Put £1 Billion in Media Spending at Risk
Cornwall Opens Devolution Talks With UK Government Over Transport and Local Services
UK Parliament Considers Sovereign Grant Reform Setting Royal Funding at £99.9 Million
Trades Union Congress Calls for Income-Based Energy Tariff Funded by Higher Bank Levy
UK Prime Minister Rejects Second Scottish Independence Referendum
House of Lords Begins Scrutiny of Bill to Lower UK Voting Age to 16
Anthropic Says Claude Was Exploited in Weapons-Related and State-Linked Cyber Activity
Institute of Directors Urges UK Government to Avoid Business Tax Increases in Autumn Budget
Rising Gilt Yields Cut UK Fiscal Headroom to About £13 Billion Ahead of Budget
UK Economy Grows 0.4% in July as Services and Technology Activity Strengthen
UK Government Promises Clearer Student Loan Guidance After Repayment Backlash
Charities Warn Unpaid Carers May Die Before Receiving Government Compensation
Dover Unrest Prompts Review of UK Counter-Extremism Strategy
Celtic Summit Leaders Reassert Right to Pursue Independence From UK
NHS Records Busiest Summer on Record Amid Severe Heatwaves
Harrods Faces Potential £150 Million Compensation Bill Over Al Fayed Abuse Claims
UK Parliament Opens Debate on Landmark Assisted Dying Legislation
Metropolitan Police Investigate Reform UK Over Alleged Foreign Electoral Donations
UK Economy Expands 0.4% in July as AI Investment Boosts Activity
Bank of England Signals Caution on Rates as Inflation Pressures Persist
Tesco Alerts Police After Scammers Use Its Branding in AI-Generated Fraud
Lindy Cameron Appointed First Female Permanent Under-Secretary at UK Foreign Office
UK Government to Rewrite Student Loan Guidance After Mis-Selling Criticism
Welsh First Minister Warns Andy Burnham Government to Respect Devolution
Trump’s Falkland Islands Remarks Trigger New Diplomatic Tension With Britain
Reform UK Receives Record £72 Million Donation From Cryptocurrency Billionaires
UK Bans Imports From Israeli West Bank Settlements and Sanctions Supporting Institutions
×