Bank of England raises interest rates to 4%, the first increase for more than three years
Summary
The Bank of England raised its base interest rate from 3.75% to 4%, its first increase in more than three years, citing inflation risks linked to the Iran war and higher energy costs. The Bank forecast that UK inflation could reach 4.9% by the middle of next year and said another increase may be needed, depending in part on how the conflict develops.Key Facts
- Eight of the nine Monetary Policy Committee members supported raising the rate to 4%.
- Committee member Catherine Mann preferred a larger increase of half a percentage point.
- The Bank said UK inflation reached 3.5% in September and revised its mid-next-year forecast from 3.2% to 4.9%.
- The Bank linked higher oil prices to rising costs for businesses and consumers.
- The Bank expects Great Britain’s household energy price cap to rise to £2,150 in January and increase again in April.
- The Bank warned that food price inflation could reach 4.75% by mid-2027.
- Governor Andrew Bailey said another rate increase was possible but described a long sequence of increases as unlikely.
- The Bank said budget measures, including an extension of the fuel duty freeze and a VAT cut on electricity bills, could lower inflation by 0.25 percentage points in mid-2027.
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