Five key takeaways from the Bank of England meeting

Inflation is expected to rise; most pay settlements for 2026 are already complete, but some committee members say higher inflation could affect wage negotiations in 2027.

Despite a surprise drop in the most recent jobless rate, unemployment has risen over the past year; the BoE warned unemployment could rise further as households save more and spend less.

Opportunities to borrow are greater, but come with their own challenges.

Lower-income households are more affected because essentials take a larger share of income; some can cut energy use or dip into savings, but many have less than two weeks of income saved compared to 2022.

In every scenario, the rising cost of living accelerates this year as energy prices push up food costs; food price inflation could rise to 4.6% in September and possibly higher later in the year.

Nearly 40% of households are on fixed tariffs, higher than about 25% four years ago, so these households will be protected until their contracts end. Prepayment meter customers can use less energy in summer but may face larger rises in winter if prices stay high.

With the Middle East events, domestic energy bills are expected to rise this summer; Ofgem's price cap suggests a typical annual bill of £1,641, rising to about £1,900 in July and staying there for the rest of the year.

About 53% of UK mortgage holders are expected to see their payments rise, while around 25% of those who fixed at higher rates should see their payments fall.

Over the next three years, average monthly payments for those moving to a new fixed-rate deal are expected to rise by around £80, though there could be wide variation and energy prices will influence this.

More than seven million homeowners have fixed-rate mortgages (about 87% of all mortgages); fixed rates do not change until expiry, typically two or five years.

Any rise in rates would increase borrowing costs and raise the return on savings.

In its most adverse scenario, with oil above $120 a barrel for the rest of the year and inflation topping 6% next year, as many as six rate rises could be possible, taking the base rate to 5.5%.

The Bank considered a range of scenarios to guide its response, with the governor's preferred scenario allowing energy prices to fall slowly; under this scenario, a rise or two could be on the cards.

The Bank of England held its key rate at the latest meeting but signalled that rises could come later in the year as the conflict in the Middle East continues to affect the economy.

The Bank recalls that roughly 25% of households had fixed tariffs when prices shot up four years ago (2022).

The Bank references the energy price spike following Russia's invasion of Ukraine in 2022 as a historical comparison, noting that the current projected peak will not be as high as that earlier period.