PomegraUK Interest Rates Rise to 4% as Inflation Climbs
Why did the Bank of England raise interest rates today?
The Bank of England (BoE) raised its base rate to 4% from 3.75% on Thursday, its first hike since 2023, as energy costs pushed UK inflation up to 3.5% in September.
Key numbers
| Bank Rate | 4.00%+0.25 pts from 3.75% |
|---|---|
| UK inflation (Sept) | 3.5%+0.4 pts vs 3.1% in Aug |
| September MPC vote | 6-3 hold3 members already wanted a rise |
| GBP/USD | ~$1.35Seven-week high before decision |
| Further hikes priced | 3–4 quarter-pointsBy Sept 2027, rate up to 4.75% |
What happened
The Bank of England (BoE) raised its base rate to 4% from 3.75% on Thursday, its first hike since 2023, as energy costs pushed UK inflation up to 3.5% in September. In September the Bank held rates at 3.75% in a 6-3 vote, with three members already wanting a rise. Prices rose 3.5% in the year to September, up from 3.1% in August, as fuel and energy costs climbed. Traders are now looking to December, with markets pricing three or more further rises during 2027.
Why it matters
The Bank of England raising its base rate to 4% makes borrowing more expensive, because banks use that rate to price mortgages and loans. Mortgage holders face about £31 more a month on tracker deals and £14 more on variable deals (per). It is the first time in over three years the Bank has pushed rates up instead of down, a sign it sees energy-driven inflation as the bigger risk.
Who this affects
- MarketmixedMedium impact
- Traders weigh more rises priced for 2027.
- CompanyneutralMedium impact
- Bank of England puts inflation ahead of growth worries.
- CompetitorsneutralLow impact
- Other central banks face the same energy-price pressure.
- IndustrybearishMedium impact
- Mortgage holders pay more; housing market faces pressure.
Bank of England vs Federal Reserve, European Central Bank
| Bank of EnglandBoE | 4.00% | +0.25 pts (5 Nov) | 2026-12-17 |
|---|---|---|---|
| Federal ReserveFed | — | — | 2026-12-09 |
| European Central BankECB | — | — | 2026-12-17 |
As of 2026-11-05
How we got here
Bank of England cuts Bank Rate from 4% to 3.75%.
MPC holds at 3.75% in a 6-3 vote, three members favouring a rise.
Bank Rate raised to 4%, the first increase since August 2023.
What to watch
- Bank of England's December decision on whether to raise Bank Rate beyond 4%2026-12-17
- Bank forecasts show inflation above 4% in early 2027, testing how many hikes markets expectQ1 2027
- Gap between markets pricing 3–4 more hikes and economists expecting about two2027
Educational content only. Not investment advice.
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