Bank of England raises rates for first time since 2023, says more may come
TLT•The Bank of England raised its rate to 4% from 3.75% in an 8-1 vote and said another increase was likely if the US-Iran conflict continues. It forecasts inflation peaking at 4.8% in the second quarter of next year.
1. Rate decision
The Bank of England raised interest rates on Thursday for the first time in over three years, taking the rate to 4% from 3.75%. The Monetary Policy Committee voted 8-1, with Catherine Mann calling for a larger increase to 4.25%.
2. More tightening possible
Governor Andrew Bailey said at least one further rate increase was likely if the conflict in the Middle East continued, but cautioned that Thursday’s move did not signal an inevitable long sequence of hikes. Deputy Governor Clare Lombardelli also said another increase was likely to be needed in the near term.
3. Inflation and growth outlook
The BoE expects inflation to peak at an average 4.8% in the second quarter of next year and return to its 2% target in the third quarter of 2028. It raised its growth forecasts to 1.6% this year and 1.3% next year; in a more adverse oil-price scenario, inflation would reach 6.2% in the third quarter of 2027.
