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Bank of England's Breeden says cost-cutting by firms helping central bank - Finance news and analysis from Global Banking & Finance Review
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Bank of England's Breeden says cost-cutting by firms helping central bank

Published by Global Banking & Finance Review

Posted on October 15, 2026

2 min read

· Last updated: October 15, 2026

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Finance Banking Inflation UK economy

Bank of England: Firms’ Cost-Cutting Makes Inflation Control Easier Amid Energy Shock

Bank of England Officials Address Inflation and Energy Price Shock

Cost-Cutting Measures and Inflation Control

Oct 15 (Reuters) - Bank of England Deputy Governor Sarah Breeden said on Thursday that cost-cutting by UK companies in response to the energy price shock caused by the Iran war would make it easier for the central bank to contain inflation.

"What's really different now, relative to when we had the last energy shock in 2022, is that people aren't looking to push costs through," Breeden said in an interview with CNBC television.

"There's a desire to absorb the shock rather than just pass it on, which makes our job as monetary policymakers a bit easier in these uncertain times."

Echoes from Bank Leadership

The comments about cost-cutting by companies echoed those made by BoE Governor Andrew Bailey earlier this week.

Monetary Policy and Interest Rates

Breeden’s Stance on Borrowing Costs

Breeden has voted with the majority of the Monetary Policy Committee to keep borrowing costs on hold since the start of the Iran war but said in September that she might change her stance if the energy price shock feeds through into broader inflation.

Market Expectations

Investors are pricing a quarter-point rate hike by the BoE next month as a near certainty.

Wage Growth and Labour Market Concerns

Comparisons to Previous Energy Shocks

Breeden, in Bangkok for the semi-annual International Monetary Fund meetings, also told CNBC she hoped wages would not rise sharply as they did in 2022 after Russia's full-scale invasion of Ukraine due to weakness in the labour market now.

Additional Commentary from BoE Officials

Chief Economist’s Perspective

Earlier on Thursday, BoE Chief Economist Huw Pill said a rate hike by the central bank should not be interpreted by investors as the start of a long series of increases.

Article Credits

(Writing by William Schomberg; editing by Suban Abdulla)

Key Takeaways

  • Firms are cutting costs and protecting margins instead of raising prices, aiding BoE’s inflation containment efforts
  • Looser labour market and weaker demand reduce pass-through into wages compared to 2022 energy shock
  • Despite this containment, markets still price in a near-certain quarter-point Bank Rate increase at November MPC meeting

References

Frequently Asked Questions

How is cost-cutting by UK firms helping the Bank of England?
Cost-cutting reduces the need for companies to pass on higher energy costs to consumers, making it easier for the central bank to control inflation.
What impact did the Iran war have on UK inflation?
The Iran war triggered an energy price shock, which raised concerns about inflation but prompted firms to absorb rather than pass on costs.
Has the Bank of England changed interest rates recently?
The BoE has kept borrowing costs on hold since the start of the Iran war, but investors expect a rate hike next month.
What is Sarah Breeden's stance on future rate hikes?
She may change her stance if energy shocks feed into broader inflation but currently supports holding rates steady.
How do current labour market conditions influence inflation risk?
Sarah Breeden noted that due to a weaker labour market, wage rises are less likely to fuel inflation as they did after previous shocks.

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