The Bank of England raised interest rates to 4 per cent on Thursday, its first increase in more than three years, as policymakers warned that energy-driven inflation could climb towards 5 per cent next year.
The Monetary Policy Committee voted 8-1 to lift Bank Rate by a quarter of a percentage point from 3.75 per cent, the BBC reported. It is the first time the Bank has increased borrowing costs since August 2023, ending a stretch of more than three years in which rates were flat or falling.
A near-unanimous vote for higher rates
Eight members of the nine-person committee backed the quarter-point rise, including Governor Andrew Bailey. The only dissenter, Catherine Mann, wanted a bigger increase, voting for a half-point rise to 4.25 per cent. Nobody voted to leave rates unchanged.
The decision reverses the split seen in September, when the committee kept the rate at 3.75 per cent by 6-3. Bank Rate had stood at 3.75 per cent since December 2025. The Bank said the rise was warranted by higher energy prices stemming from the conflict in the Middle East, which has pushed up global oil prices and, with them, UK fuel costs. Consumer prices rose 3.5 per cent in the year to September 2026, largely because of fuel, against the Bank’s 2 per cent target.
More rises may follow
Governor Bailey said the increase “shouldn’t be seen as the first in an inevitable long sequence of hikes,” but warned that “unless the conflict in the Middle East is resolved, neither does it seem likely to be the last increase.” The Bank now expects inflation to peak at an average of about 4.9 per cent in the second quarter of 2027 and not to return to 2 per cent until 2028.
The move lands on households already facing rising energy bills and higher mortgage costs, and it comes on the same day global stock markets tumbled. The Bank’s next decision is due on December 17, and the Office for National Statistics publishes October consumer price inflation on November 18. For borrowers, the message from Threadneedle Street is clear: the era of falling rates is over, at least for now, and the path of borrowing costs depends on whether the Middle East conflict eases.
Related coverage: White House Delays Lisa Cook Hearing to December 14 | Dow Plunges 1,833 Points as Wall Street Rout Hits AI Stocks
