The recent rise in government bond yields will help limit the impact of higher energy costs on U.K. prices, but the Bank of England may have to raise its key interest rate if inflationary pressures build, Deputy Governor Dave Ramsden said Monday.

The BOE left its key interest rate at 3.75% earlier this month, although investors expect to see an increase to 4% in November. Ramsden's comments will likely reinforce those expectations, since he was one of the six members of the Monetary Policy Committee who voted to leave borrowing costs unchanged.

"Whilst the policy stance continues to provide restrictiveness, were upside pressures on the inflation outlook to continue to build, there could be a case for increasing Bank Rate," he said.

The U.K.'s annual rate of inflation rose to 3.1% in August from 2.9% in July, well above the BOE's 2% target. However, that pickup was largely confined to energy, with little sign of an acceleration in the prices of services.

Ramsden said the rise in government bond yields since the start of the U.S.-Iran war, which increases the cost of other forms of borrowing such as mortgages, is helping to contain the spillover to other prices from energy moves.

"I think the tightening we have seen in financial conditions since the outbreak of the conflict, has helped to limit the potential for some of the direct effects from the energy shock to propagate through to second round effects," he said.

However, he said there is an increased risk that high energy prices will eventually prompt workers to secure higher pay rises, and businesses to lift their prices to cover increased costs.

"I think the risks to the inflation outlook, whether external or domestically generated, have tilted more to the upside," he said.

In a speech last week, Deputy Governor Clare Lombardelli said the need for a rate rise will grow if energy prices remain high. Lombardelli also voted to hold the key rate earlier this month.

A rate rise in November would see the BOE realigning with the Federal Reserve, the European Central Bank and the Bank of Japan, all of which have raised borrowing costs at least once since the conflict began.