The Bank of England is expected to raise interest rates for the first time in more than three years this week, as policymakers move to contain inflation that has climbed further above target.
Traders in financial markets widely expect the Bank’s Monetary Policy Committee to lift Bank Rate to 4%, from 3.75%, when it announces its next decision on Thursday 5 November. That would be the first increase in borrowing costs since August 2023, ending a period in which rates were cut or held as inflation fell back from its peak.
Pressure on the committee has grown since official figures showed consumer prices index inflation rose to 3.5% in September, its highest level in 11 months and well above the Bank’s 2% target. The conflict in the Middle East has helped push prices higher, with a surge in petrol and diesel costs a major driving force.
Inflation is expected to climb further this winter. Ofgem’s energy price cap rose by 3.6% for a typical household on 1 October and is forecast to jump by a further 22% in January, adding to the squeeze on household budgets.
Economists say the case for a precautionary rise is strengthening. Ellie Henderson, an analyst at Investec, said many committee members’ patience with the recent rise in inflation has worn thin, warning that the longer energy prices stay elevated, the greater the risk that a temporary price shock becomes more permanent. She cautioned that producers might not be willing or able to shoulder higher energy costs for much longer, which could push up prices in shops.
Suren Thiru, chief economist for the Institute of Chartered Accountants in England and Wales, said a rise to 4% looks “all but certain” and would likely be viewed as a precautionary move to contain price pressures. He added that the Bank’s updated forecasts are likely to show a mixed picture, with slightly stronger growth this year overshadowed by weaker growth further out as rising inflation and higher energy costs bite, keeping further rises on the table.
There are, however, signs of resilience in the economy for the committee to weigh. The economy unexpectedly grew by 0.1% in August, and unemployment fell to 4.7% in the three months to August, its lowest level in more than a year.
For borrowers, the expected move would mean higher costs. A rise in Bank Rate typically feeds through to mortgage and loan rates over time, while savers could see better returns on deposits. Nothing is confirmed until Thursday’s announcement, and the committee could still choose to hold rates if it judges that inflation pressures will fade on their own.
Sources: PA News via the Gazette & Herald, “Bank of England expected to raise interest rates for first time since 2023”, 1 November 2026, https://www.gazetteherald.co.uk/news/national/26687799.bank-england-expected-raise-interest-rates-first-time-since-2023/
