The Bank of England lifted its benchmark rate to 4% at noon on November 5, its first increase since August 2023. Eight of the nine Monetary Policy Committee members backed the quarter-point move. The ninth, Catherine Mann, voted for a 50-point rise to 4.25%. The decision ends six meetings without a change, a run that began after the cut to 3.75% in December 2025.
No member voted to hold. Markets had expected at least one hold vote, so the absence of any was the firmer signal.
Energy prices drove the call. The Middle East conflict has pushed oil higher for months. Its statement said the inflationary pressure now in the pipeline was enough to warrant a rise, even though signs of spillover into wages and broader prices stayed limited. September CPI came in at 3.5%, up from 3.1% in August and 1.5 points above the Bank's 2% target. Its own forecast puts inflation near 5% by mid-2027. Bailey said energy prices had built up enough pressure in the pipeline to justify the increase, per Reuters. He added that a further rise looked possible without news that softens the inflation risks.
Markets had priced the move in full, so the pound barely moved. The MarketRadar snapshot showed GBP/USD at 1.3460, up 0.19% on the day, and GBP/EUR held near 1.2000. Traders now look to the path after this hike. A second rise could land as soon as February 2027, with a further move in the spring and one more before year-end. That path takes Bank Rate to 4.75% by Christmas 2027, per AJ Bell via MoneySavingExpert. That pricing has already cooled from a few weeks ago, when traders pencilled in 5% by the close of 2027.
The rate path in numbers
| Date | Bank Rate | What changed |
|---|---|---|
| December 2025 | 3.75% | Cut; last move before November 5 |
| November 5, 2026 | 4.00% | Up 25 bps; 8-1 vote, Mann wanted 4.25% |
| Market pricing, Christmas 2027 | 4.75% | Up 75 bps from 4.00% (AJ Bell, per MoneySavingExpert) |
Eleven months of waiting, one step. The gap between September CPI at 3.5% and the expected peak near 5% is 1.5 points. Its 2027 growth forecast rose to 1.3%, and it sees unemployment at 5.1% in 2028, per InvestingLive. Borrowers feel the move at once. A tracker mortgage rises by 0.25 points, about 15 pounds a month per 100,000 pounds of debt, per MoneySavingExpert. That works out to 30 pounds a month on a 200,000-pound mortgage and 45 pounds on a 300,000-pound one.
Why it matters
London now leads the three big Western central banks on tightening. The Federal Reserve held its benchmark at 3.75% to 4% on October 28. The European Central Bank held all three of its key rates on October 29. That makes it the first of the three to lift rates in this round. The move also closes a loop that opened seven weeks ago, when UK inflation hit 3.5% in September and put a November hike on the table. Inside the committee the split ran both ways. Deputy Governor Clare Lombardelli and Chief Economist Huw Pill signalled more rises may be needed. Alan Taylor and Swati Dhingra treated this hike mainly as insurance and said the next move could go either way or stay put. Mann, the lone dissenter, argued that CPI at 3.5% had pushed the economy into a high-inflation regime where households and firms react more sharply. She called a 50-point rise "good policy" from a risk-management view, per Reuters.
What to watch
- February 2027 meeting: traders price a second rise as soon as February, with Bank Rate at 4.75% by Christmas 2027.
- UK wage data and the 2027 pay round: the committee watches pay growth, business pricing, and slack meeting by meeting.
- Energy prices and Middle East developments: energy prices drove the decision, and any de-escalation would soften the case for more rises.
- December 8-9 Federal Reserve meeting: December hike odds stood at 83% as of October 29 (FXStreet/CME FedWatch), so the Fed could follow London within five weeks.
- GBP/USD at 1.3460: a break above 1.35 would put the pound at its firmest since the September slide, while a slide back under 1.32 would undo the post-decision calm.
Key points
- Bank Rate now stands at 4% after a 25-basis-point rise on November 5, 2026, the first increase since August 2023.
- The Monetary Policy Committee voted 8-1; Catherine Mann dissented, voting for a 50-point rise to 4.25%.
- September CPI came in at 3.5%, up from 3.1% in August, against a 2% target. The Bank's own forecast puts inflation near 5% by mid-2027.
- Traders price a second rise as soon as February 2027 and Bank Rate at 4.75% by Christmas 2027.
- GBP/USD traded at 1.3460 in the MarketRadar snapshot, up 0.19% on the day, with GBP/EUR near 1.2000.
MarketRadar take
The 8-1 vote, with no member voting to hold, reads as a committee that sees the energy shock as a 2027 problem rather than a one-month print. With Bank Rate at 4% and markets pricing 4.75% by Christmas 2027, sterling has rate support that the euro and the dollar do not have right now. GBP/USD at 1.3460 sits 0.4% below the 1.35 level that would mark a clean break from the September slide. The risk to that read is the one Taylor and Dhingra flagged. If energy prices cool and pay growth stays subdued, the market will price out hikes it has already priced in, and the pound gives back the rate advantage just as fast.
