Rabobank warns UK inflation could hit 4% if oil stays at $100, exceeding the Bank of England’s $71 baseline projection.
Oil prices above $90 are challenging the Bank of England’s inflation outlook, which assumes Brent falls to $71 from $76. The central forecast projects inflation peaking near 3.2%, but current levels suggest higher risks.
The BoE’s baseline relies on oil futures from early July, but Brent has since climbed closer to $100. A severe scenario with oil at $100 could push inflation to 4% or more, complicating monetary policy decisions.
Energy remains the dominant factor for UK rate expectations, though the bar for a September hike remains high. Policy shifts depend on whether price shocks feed into wages or broader inflation expectations.