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United Kingdom

Bank of England raises rates to 4% in 8-1 vote on energy-driven inflation

The first rate rise in more than three years signals tighter borrowing costs for households and businesses as UK inflation climbs above target.

Photo: Ugur Akdemir, Unsplash

What happened

The Bank of England's Monetary Policy Committee voted 8-1 to raise Bank Rate by 0.25 percentage points, from 3.75% to 4%, its first increase since August 2023. MarketScreener+4 Catherine Mann voted for a larger half-point rise to 4.25%. MTA+2 The decision followed rising energy-driven inflation linked to the conflict in the Middle East, with UK inflation at 3.5% in September, up from 2.6% in June. MarketScreener+3 Swati Dhingra and Alan Taylor, who had previously favoured holding rates, supported the increase this time. MTA Governor Andrew Bailey said today's rise should not be viewed as the first in an inevitable long series, but that unless the Middle East conflict is resolved it seems unlikely to be the last. MarketScreener

Around it

The Bank expects inflation to reach around 5% by mid-2027 before falling back as the direct effects of higher energy prices fade. MTA+2 Over the 15 working days to 27 October, Brent crude averaged $108 a barrel and UK gas 216 pence per therm, 38% and 81% higher than at the July Monetary Policy Report. The ColdAI Times+1 Sterling strengthened initially after the decision but retreated against the US dollar in early Friday trading, while the Bank expects energy price pressures to slow growth sharply next year. Yahoo Finance+1 The increase brings UK interest rates level with US rates, in a range of 3.75% to 4%. MarketScreener

What comes next

The October inflation data is scheduled for release on 18 November. MarketScreener The next Monetary Policy Committee decision is due on 17 December 2026. traderpublic.com

Sources

  1. MarketScreenerThe Bank of England has a message to deliver
  2. LGT Wealth ManagementWhy rising interest rates may not reward UK savers
  3. MTAMonetary Policy Committee Interest Rate Decision, November 2026
  4. Yahoo FinanceThe Pound Looks Strong, But Britain’s Economy Still Has a Hangover
  5. currencysolutions.comBank of England Raises Rates Amid European Fiscal Concerns
  6. The ColdAI TimesBank of England Raises Bank Rate to 4% in an 8-1 Vote, Its First Hike Since 2023, as Energy Prices Lift Inflation Outlook
  7. traderpublic.comBank of England raises Bank Rate to 4% after 8, 1 MPC vote

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