Inflation remains stable and oil prices are falling; Fitch expects the Bank of England to hold rates steady throughout 2026.

⑴ Analysts from Fitch Ratings' economic department stated that, with overall inflation holding steady at 2.8% in May and oil prices falling this week, Bank of England policymakers will feel reassured and can keep interest rates unchanged. ⑵ The institution pointed out there is little evidence that rising energy prices have driven up the cost of other goods, and the risk of energy costs passing through to broader prices remains controllable. ⑶ Although the Ofgem price cap will be raised by 13% next month, which will push up overall inflation in the second half of this year, the sharp fall in oil prices this week—if it continues—will effectively prevent inflation expectations from rising further. ⑷ Combined with a weak labour market, analysts expect the Bank of England is likely to keep interest rates unchanged throughout 2026 and resume rate cuts in 2027. ⑸ From a policy perspective, manageable inflation data together with a pullback in energy prices provide the Bank with room to observe, while a weakening job market further reduces the necessity for a rate hike in the near term. Ongoing attention will be paid to whether oil prices can continue to buffer inflation.