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United Kingdom

Bank of England raises interest rates to 4% to tackle inflation

The first rate rise in more than three years raises borrowing costs for households and businesses as energy-driven inflation climbs.

Photo: Politico Europe

What happened

The Bank of England's Monetary Policy Committee voted 8-1 to increase Bank Rate by 0.25 percentage points, to 4%, from 3.75%. Bank of England+3 It was the first increase since August 2023, and the one dissenting member, Catherine Mann, preferred a rise of 0.5 percentage points to 4.25%. Bank of England+2 The decision followed UK CPI inflation rising to 3.5% in September, and the conflict in the Middle East has pushed global energy prices higher. Bank of England+1 The bank said monetary policy is not on a pre-set path and that it will adjust Bank Rate as necessary to return CPI inflation to its 2% target. tradingeconomics.com+1

Around it

The bank expects inflation to rise to around 5% by the middle of next year before it falls back. Bank of England+2 Governor Andrew Bailey said that a sharp fall in energy prices after the US midterm elections could limit the prospect of further rate increases, and that resolving the Middle East conflict is the best outcome. ABC News+1 The decision came just over a week after the Chancellor's first Budget, which raises the tax on savings interest from April 2027. LGT Wealth Management

What comes next

The next interest-rate decision is due on December 17, 2026. Bank of England+1 October UK inflation data is due to be released on November 18. MarketScreener

Sources

  1. Bank of EnglandBank rate increased to 4%
  2. ABC NewsBank of England raises interest rates to 4% to tackle higher inflation
  3. tradingeconomics.comBoE Raises Rates for 1st Time Since 2023
  4. MarketScreenerThe Bank of England has a message to deliver
  5. Politico EuropeUK hikes rates with eye on Trump’s next Middle East move
  6. LGT Wealth ManagementWhy rising interest rates may not reward UK savers
  7. Okay NewsBank of England Raises Rate to 4% as Inflation Outlook Worsens

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