Bank rate increased to 4%
The Bank of England raised its benchmark interest rate to 4% on 4 November 2026, citing persistent inflation pressures driven by elevated global energy prices and stronger-than-expected UK activity.
The Monetary Policy Committee voted 8–1 to raise Bank Rate by 0.25 percentage points to 4%, with one member preferring a 0.5 percentage point increase. The decision followed nine months of conflict in the Middle East, which has pushed global energy prices further upward from already high levels. UK Consumer Prices Index inflation reached 3.5% in September and is projected to climb to around 5% by mid-2027 before easing as energy price effects fade and tighter policy takes hold. The Bank noted that while direct energy costs are already feeding into household and business bills, there is limited evidence yet of broader price or wage pressures spreading through the economy.
Energy prices have surged, with Brent crude futures averaging $108 per barrel and UK natural gas futures at 216 pence per therm over the 15 working days to 27 October—38% and 81% higher, respectively, than in July. The conflict’s duration and potential escalation remain key risks to energy markets, while reduced supply buffers could amplify price volatility. The Bank stressed that monetary policy cannot influence global energy costs but is calibrated to ensure inflation returns sustainably to the 2% target despite these pressures.
UK CPI inflation stood at 3.5% in September, with direct energy effects contributing about 1 percentage point, largely from fuel costs. While food inflation has remained lower than earlier forecasts, the Bank warned that prolonged energy shocks could eventually pass through to broader consumer prices if firms’ cost buffers are exhausted. Forward-looking indicators of wage and price expectations have shown little movement, but the risk of second-round effects is judged to have increased given the elevated inflation outlook.
The Bank’s latest projections, conditioned on announced government policy, indicate headline CPI inflation could reach around 4.5% in early 2027 and around 5% in mid-2027. The Budget measures are expected to reduce CPI inflation by 0.25 percentage points by mid-2027, though fiscal policy’s medium-term stance is still seen as a drag on growth. The Committee emphasised that policy is not on a preset path and will be adjusted as needed to ensure inflation returns to target, while monitoring pay, pricing behaviour, and economic slack.