Danske Bank Notes Increased Risk of Bank of England Rate Hike in Q4

11:02 AM EDT, 09/17/2026 (MT Newswires) -- Danske Bank Research still expects the Bank of England to hold its key rate at 3.75% for the rest of 2026 after doing so at its September meeting, but warned that the risk is "increasingly skewed" toward a hike in the fourth quarter. "Our base case remains for an unchanged Bank Rate until June 2027, when the BoE can resume the cutting cycle and deliver another 25bp rate cut. Bank Rate of 3.75% is already restrictive, and we are more sceptical about the growth outlook for the remainder of 2026," the research firm said in a Thursday note. "If energy markets do not improve and the economy continues to look resilient, we would then expect a rate hike, even in the absence of spillovers to broader price-setting. The cost of an 'insurance hike' has declined in recent months, and this risk has clearly increased compared with July." Analysts also noted BoE Governor Andrew Bailey as the key Monetary Policy Committee member to keep an eye on, citing his growing concern over the rising risk of second-round effects if the ongoing Middle East war persists for a longer period. "However, we also see a clear risk that the economy will lose momentum as real wage growth has turned negative for many in H2 and spillover effects on inflation do not seem imminent," Danske Bank added.