The Bank of England raised its main interest rate to 4% on November 5 for the first time in more than three years, warning that inflation could approach 5% by mid-2027.
The rise was a quarter of a percentage point and lifted Bank Rate from 3.75%. The Bank said higher energy costs, linked to the conflict in the Middle East, risk pushing prices up further. Eight members of the Monetary Policy Committee supported the increase.
One member wanted a larger rise, to 4.25%. Annual inflation was 3.5% in September, above the Bank’s 2% target. Policymakers said they expected energy costs to raise other prices and household bills.
The higher rate is meant to limit those further price increases. It can also make borrowing more expensive for households and businesses. Governor Andrew Bailey said the move should not be seen as the start of a series of rate increases that will definitely happen.
He warned that another rise may be needed if the regional conflict continues. The Bank also forecast stronger UK growth than it had expected in July. However, it said the economy could slow in the coming quarters.