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Oil prices push up UK energy cap ahead of next month’s budget
The Bank of England expects the energy price cap to rise as much as 24% in the new year, adding pressure on policymakers managing borrowing costs amid a global bond selloff.
Oil prices stayed elevated due to the Iran war, creating renewed pressure on UK policymakers ahead of John Healey’s budget next month, the Guardian Business reports. Treasury sources said the sharp jump in oil and gas prices leaves “less room” for manoeuvre than a month ago, as a global bond selloff is also lifting government borrowing costs.
Officials are working “at pace” on potential support options for consumers if high prices persist, with concern centered on a sharp rise in the quarterly energy price cap in January. The outlet said any package is expected to fall well short of the broad subsidies introduced under Liz Truss in 2022, with the Treasury pointing to measures already taken, including Andy Burnham’s VAT cut on electricity bills.
The Bank of England said it expects the energy price cap to rise by as much as 24% in the new year after holding interest rates at 3.75% last week, according to the Guardian Business. The bank’s chief economist, Clare Lombardelli, warned that the longer higher energy prices remain tied to the war, the greater the risk rates would have to rise, potentially raising mortgage costs just as Burnham has promised voters “breathing space.”
Brent crude was up nearly 5% to $108 on Thursday after reports of further military clashes between Saudi Arabia and Houthi forces, the story added. The Guardian Business also noted that uncertainty around the wider US Israeli war on Iran is complicating expectations for when gasoline price pressures in the US could ease ahead of midterm elections.
Latest closeWTI crude $95.27 ▲3.4%|Brent $100.98 ▼2.0%|Gasoline (RBOB) $3.379 ▼5.8%