Copy article

Will the energy price cap impact inflation and borrowers? Will it impact the BoE's base rate?

ended 27. August 2025

From 1 October to 31 December 2025 the price for energy for a typical household who use electricity and gas and pay by Direct Debit will go up by 2% to £1,755 per year, energy industry regulator Ofgem announced today. 

  • Will the energy price cap rise impact inflation?
  • Will it impact the BoE's base rate this year?
  • What does Rachel Reeves need to do? 
  • Is Reeves to blame for the energy price rises?
  • Any other thoughts of the impacts of or reasons for the price rise?

Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange commented:

“The 2% energy price cap increase will further boost UK inflation, which is already expected to exceed 4%, double the Bank of England's 2% target. This comes at a time when gilt yields have reached their highest levels since 1998. The inflationary pressure should delay any further Bank of England base rate cuts and may even necessitate rate increases to control inflation. Higher energy bills will reduce household disposable income, while elevated mortgage rates will continue to burden borrowers. Chancellor Reeves should consider expanding support measures such as the Warm Home Discount, reducing electricity levies that fund the green transition, and maintaining balanced fiscal policy without resorting to tax increases. Notably, this situation is not primarily of her making, as the price cap is determined by Ofgem rather than government policy.”

Keith Budden, Managing Director at Liss-based Ensurety commented:

"This is one area where I don't think anyone can blame 'Rachel from Accounts'. The price of energy is much more a global issue and the current uncertainty around tarriffs from the USA, the ongoing conflicts in Gaza and Ukraine, all serve to keep the price of energy high. The dream of all energy coming from renewables and therefore being cheaper (once the capital cost is dealt with) is still some way away and net zero now feels more like a mirage than a target. Any increase in energy prices is unwelcome, but I guess the only small consolation is the increase is less than the rate of inflation. But either way the cost of living crisis goes on."

Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer commented:

“Sticking a nail in an old electric meter to fight inflation? Now that's an idea, if a slightly unorthodox plan. It's a throwback to a simpler time when a little bit of DIY mischief was all it took to stick it to the rising bills. You're not just busting inflation; you're reviving a time-honored tradition of meter-tampering, a folk art passed down through generations of penny-pinching pioneers. Sure, central bankers are busy with interest rates and quantitative easing, but those are just complicated words for what you're doing with a rusty nail and some sheer determination — you’re the true maestro of the macroeconomy. The spinning wheel inside the meter is your personal economic indicator, and that nail is your very own fiscal policy. It’s a direct, hands-on approach. Why wait for trickle-down economics when you can take action. Well that's what my grandad would say anyway when he was alive.”
 

3 responses from the Newspage community

Copy all

Copy

Editor
Darryl Dhoffer
Founder at The Mortgage Geezer
Sticking a nail in an old electric meter to fight inflation? Now that's an idea, if a slightly unorthodox plan. It's a throwback to a simpler time when a little bit of DIY mischief was all it took to stick it to the rising bills. You're not just busting inflation; you're reviving a time-honored tradition of meter-tampering, a folk art passed down through generations of penny-pinching pioneers. Sure, central bankers are busy with interest rates and quantitative easing, but those are just complicated words for what you're doing with a rusty nail and some sheer determination — you’re the true maestro of the macroeconomy. The spinning wheel inside the meter is your personal economic indicator, and that nail is your very own fiscal policy. It’s a direct, hands-on approach. Why wait for trickle-down economics when you can take action. Well that's what my grandad would say anyway when he was alive.
Copy

Editor
Tony Redondo
Founder at Cosmos Currency Exchange
The 2% energy price cap increase will further boost UK inflation, which is already expected to exceed 4%, double the Bank of England's 2% target. This comes at a time when gilt yields have reached their highest levels since 1998. The inflationary pressure should delay any further Bank of England base rate cuts and may even necessitate rate increases to control inflation. Higher energy bills will reduce household disposable income, while elevated mortgage rates will continue to burden borrowers. Chancellor Reeves should consider expanding support measures such as the Warm Home Discount, reducing electricity levies that fund the green transition, and maintaining balanced fiscal policy without resorting to tax increases. Notably, this situation is not primarily of her making, as the price cap is determined by Ofgem rather than government policy.
Copy

Keith Budden
Managing Director at Ensurety
This is one area where I don't think anyone can blame 'Rachel from Accounts'. The price of energy is much more a global issue and the current uncertainty around tarriffs from the USA, the ongoing conflicts in Gaza and Ukraine, all serve to keep the price of energy high. The dream of all energy coming from renewables and therefore being cheaper (once the capital cost is dealt with) is still some way away and net zero now feels more like a mirage than a target. Any increase in energy prices is unwelcome, but I guess the only small consolation is the increase is less than the rate of inflation. But either way the cost of living crisis goes on.