The Bank of England has raised Bank Rate by 0.25 percentage points to 4 per cent, its first increase in more than three years.
The Monetary Policy Committee (MPC) voted 8–1 for the rise at its meeting ending on 4 November. One member, Catherine L Mann, voted for a larger increase of 0.5 percentage points, to 4.25 per cent. The decision was published on 5 November.
Why the Bank acted
The Bank said global energy prices have continued to rise as the conflict in the Middle East enters its ninth month. These were its main points:
- UK CPI inflation rose to 3.5 per cent in September.
- Inflation is now expected to rise to around 5 per cent by the middle of 2027, before falling back.
- Activity data in recent months have generally been stronger than expected.
- So far there is limited evidence of higher energy costs feeding into other prices and wages. Even so, the Bank judged that the inflationary pressure already building was enough to justify a rise.
Consumers and retailers
The minutes note that food inflation has stayed lower than expected earlier in the year. The Bank’s own contacts with businesses suggest many firms are absorbing higher costs partly through lower profit margins. The Committee judged that these buffers would mostly prove temporary, and that cost pressures could pass through to consumer prices if the energy shock persists.
The minutes say consumer demand has held up so far despite the hit to real incomes, although the latest consumer confidence reading suggested this might not continue. Benchmark two-year mortgage rates have risen by nearly 50 basis points since the start of September, and new mortgage approvals have been falling.
The Committee expects measures announced in the 28 October Budget to reduce CPI inflation by around a quarter of a percentage point by the second quarter of 2027.
What comes next
Governor Andrew Bailey said that without news that softens the risks to inflation, he could see the argument for a further increase. Other members took a different view. Alan Taylor described the move as a “one-for-now” insurance rise and said it was not the start of a cycle of increases.
The MPC’s next decision is due on 17 December 2026.
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