BANK OF ENGLAND WARNS OF INFLATION RISK AS OIL PRICES NEAR USD$100

Bank of England Governor Andrew Bailey warned of upside inflation risks driven by elevated energy prices as he appeared before Parliament's Treasury Committee on Tuesday. Oil prices moved towards USD$100 per barrel amid the conflict between the US and Iran, with Brent crude quoted at USD$98.00 at the London equities close. The governor noted that energy prices could rise further as a result of the US-Iran conflict, and that global inflationary risks are tilted to the upside. The FTSE 100 index closed down 10.47 points, or 0.1%, at 10,811.66, while the FTSE 250 fell 157.83 points, or 0.6%, at 24,348.85.

Bailey stated that the market curve, which is currently pricing in three Bank of England interest rate hikes over the next 12 months or so, looks fair given current conditions. Ukrainian strikes on Russian oil facilities have hit the Kremlin's revenues and pushed Russia's refining output to its lowest level in 20 years, adding to global supply pressures. Yemen-allied militants attacked several energy facilities in Saudi Arabia, forcing a temporary halt to some operations and contributing to the upward pressure on crude. Brent oil had hit a session high of USD$99.46 earlier in the day before settling marginally lower.

Bailey and other senior members of the Monetary Policy Committee discussed interest rates, inflation and ongoing economic pressures in the UK during their Treasury Committee appearance. The governor's assessment comes as investors weigh the inflationary implications of sustained higher energy prices on the broader economy.