PomegraBank of England Set to Raise Rates to 4% on Rising Inflation
Why is the Bank of England raising interest rates on Thursday?
The Bank of England (BoE) is set to raise Bank Rate to 4% from 3.75% on Thursday, its first hike since 2023, because energy costs pushed September inflation to 3.5%.
Key numbers
| Bank Rate (expected Thursday) | 4.00%from 3.75% |
|---|---|
| UK inflation, September | 3.5%+0.4 pts vs August |
| Core inflation (excl. energy, food) | 2.8%from 2.6% |
| Average UK petrol price | 169.5p/litrehighest since Aug 2022 |
| Expected MPC vote | 7–2vs 6–3 hold in September |
| GBP/USD | 1.3430+0.3% |
What happened
The Bank of England (BoE) is set to raise Bank Rate to 4% from 3.75% on Thursday, its first hike since 2023, because energy costs pushed September inflation to 3.5%. Prices across the UK were 3.5% higher than a year earlier, up from 3.1% in August, mostly because petrol and diesel cost more. The Bank had forecast only 3% in July. Traders expect its nine rate-setters to vote 7–2 for the rise, after a 6–3 vote to hold in September.
Why it matters
The Bank of England sets the base cost of borrowing in Britain, so a rise to 4% can make new mortgages, loans and business borrowing more expensive. It would be the first increase in more than three years, after a period of cuts. Markets are betting on three to four more quarter-point rises in 2027, though the Bank may push back on that idea.
Who this affects
- MarketneutralLow impact
- Traders already price the hike; sterling steady.
- CompanyneutralMedium impact
- Bank of England ends its hold, with a 7–2 vote expected.
- CompetitorsneutralLow impact
- Fed and ECB held rates; ECB debated hiking.
- IndustrymixedMedium impact
- UK borrowers pay more; savers may earn more.
Bank of England vs Federal Reserve, European Central Bank
| Bank of England— | 3.75% (4.00% expected) | Held 6–3, 17 Sep | 3.5% |
|---|---|---|---|
| Federal Reserve— | 3.75–4.00% | Held 10–2, 28 Oct | 3.7% |
| European Central Bank— | 2.50% (deposit) | Held, 29 Oct | 3.8% |
As of 2026-11-02
How we got here
BoE holds Bank Rate at 3.75% in a 6–3 vote; three members back a hike.
ONS reports September UK inflation at 3.5%, up from 3.1%.
Fed holds its rate at 3.75–4.00%; two members dissent in favour of a hike.
ECB holds its deposit rate at 2.50% after debating a hike.
What to watch
- BoE decision at 12:00 GMT, then Governor Bailey's press conference; watch the vote split against the expected 7–2.2026-11-05
- Whether the Bank pushes back on market bets for three to four more hikes in 2027.2026-11-05
- October UK inflation figures from the ONS.2026-11-18
Educational content only. Not investment advice.
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