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The Bank of England is preparing to unveil any changes to the base rate later this month

The head of the Bank of England is sounding the alarm over the "upside" inflation risks facing the UK economy in the months ahead.

Speaking before Parliament's Treasury Committee, the central bank's governor Andrew Bailey pushed back against suggestions that the central bank has a predetermined path for borrowing costs.

Mr Bailey acknowledged that the balance of risks to inflation remains tilted to the upside, driven primarily by energy prices, but insisted that market expectations of rate rises should not be taken as a foregone conclusion.

He told MPs: "The risks are on the upside, the risk particularly being with energy prices. What I want to dispel is the idea that we have a secret plan and we know where we are going to go to."

Interest rates in the UK currently stand at 3.75 per cent, with the Bank's Monetary Policy Committee (MPC) due to convene again next week to determine whether borrowing costs should go up, remain unchanged, or be cut.

Forecasters have broadly anticipated that rates will be raised at least once during the next twelve months, as expectations mount that inflation will edge higher.

Financial markets already pricing in tighter monetary policy, though Mr Bailey was keen to stress that such market pricing does not guarantee any particular outcome from the committee's deliberations.

Megan Greene, an external MPC member who backed a rate rise at last month's vote, expressed her own unease about the instability in energy and commodity markets stemming from the ongoing Middle East conflict.

She told the committee: "The conflict has been six months now so that worries me in terms of volatility down the line.

"We face such incredible uncertainty so, in my view, it is appropriate to take a risk management strategy and think about how you manage your losses."

Mr Bailey added: "To state the obvious, the conflict is still going on and causing a high level of energy prices."

The Governor warned that significant price swings in energy markets are spilling over into broader financial conditions.

He noted: "Quite a bit of volatility in energy prices is feeding through into financial markets."

The BoE governor also left open the possibility that the situation could deteriorate further, cautioning that current elevated energy costs may not represent the peak.

"We have higher energy prices and they could be higher still," Mr Bailey told MPs.

The central bank's MPC is scheduled to next meet on September 17, 2026