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Two senior Bank of England interest rate-setters suggested on Thursday that they were getting closer to voting for \u200can increase in borrowing costs, as unrelentingly high energy costs raised the risk of inflation getting stuck at high levels.<\/strong><\/p>\n Deputy Governors Clare Lombardelli and Sarah Breeden, who both voted to hold the BoE\u2019s benchmark rate last week at 3.75%, said they were considering shifting position.<\/p>\n \u201cThe longer higher energy prices persist, the greater the risk that \u200bindirect effects build and that inflation expectations, wage bargaining and price-setting behaviour begin to adjust in response,\u201d Lombardelli said in \u200ba speech in Warsaw.<\/p>\n Breeden, speaking at an event in London, sounded a similar warning.<\/p>\n \u201cThe more sparks we\u2019re \u2060throwing in the tinderbox, the more likely we might have to turn the hose on it,\u201d Breeden told the London Macro Policy \u200bForum organised by the National Institute of Economic and Social Research.<\/p>\n Breeden said the BoE would watch carefully for signs of how big \u200bthe energy price shock was proving and how much the rise was filtering through into the broader economy.<\/p>\n BOE KEPT RATES UNCHANGED AFTER OUTBREAK OF IRAN WAR<\/strong><\/p>\n Britain\u2019s central bank has so far not followed the U.S. Federal Reserve and the European Central Bank which have raised rates. But it warned last week it \u200bmight follow suit if the Iran war drags on and it predicted British inflation will top 4% early next year, more than \u200bdouble its 2% target.<\/p>\n A third member of the Monetary Policy Committee speaking on Thursday sounded a less urgent note about the prospect of an increase \u200cin borrowing \u2060costs.<\/p>\n Swati Dhingra, who was one of the strongest advocates of lowering borrowing costs when the BoE was cutting rates, said the extent of long-term inflation pressures in Britain caused by the Iran war would become clearer over the coming winter months.<\/p>\n Dhingra said Britain was not experiencing the kind of broad-based price rises that occurred in 2022, when energy prices jumped in response to Russia\u2019s full-scale invasion of Ukraine, \u200band that the country\u2019s jobs market \u200bwas now weaker.<\/p>\n However, investors are \u2060assigning a 75% chance of the BoE raising its Bank Rate by a quarter of a percentage point at its next meeting in November. Another hike was fully priced in by February.<\/p>\n Governor Andrew Bailey \u200bhas said previously that the BoE\u2019s decision not to follow through on expected rate cuts earlier \u200bthis year, after \u2060the start of the conflict in the Gulf, had done much of the job of tightening financial conditions in markets.<\/p>\n But last week he said \u201cthe longer this goes on, the more difficult this becomes\u201d, referring to the rise in energy prices.<\/p>\n Bailey is due to speak publicly on Friday.<\/p>\n Analysts at \u2060bank Investec \u200bsaid they now saw the probability of the BoE moving at its next \u200bMPC meeting.<\/p>\n \u201cUnless there is material progress in negotiations that see substantial energy flows resume transit through the Strait of Hormuz, we imagine that tolerance for the majority of \u200bcommittee members will soon run thin, triggering a 25bp rate hike, likely in November,\u201d they said.<\/p>\n<\/div>\n