The latest rise in energy prices will push the Bank of England to raise interest rates by 25 basis points twice, from 3.75% to 4.25% by February next year, rather than to 4.75% in 2027 as investors expect. The soft labour market, as shown by our proprietary UK labour market indicators, means CPI inflation will fall back to 2.0% early in 2028. That would pave the way for interest rates to be cut, perhaps to 3.50% in 2028.