Bank of England raises rates for first time since 2023, warns another move likely
TLT•The Bank of England raised its policy rate to 4% from 3.75% in an 8-1 vote and said at least one more increase was likely if the US-Iran conflict continues. It sees inflation peaking at 4.8% in the second quarter of 2027.
1. Rate raised to 4%
The Bank of England raised interest rates to 4% from 3.75%, with eight members of its Monetary Policy Committee voting for the increase and one voting for a larger, half-point move. Governor Andrew Bailey said another increase was not inevitable, but appeared likely unless the Middle East conflict is resolved.
2. Inflation outlook worsens
The central bank expects inflation to average 4.8% in the second quarter of 2027 and return to its 2% target in the third quarter of 2028. In a more adverse scenario, with oil prices peaking around $130 a barrel, inflation would reach 6.2% in the third quarter of 2027.
3. Growth forecasts revised up
The Bank of England raised its growth forecasts to 1.6% this year and 1.3% next year. It attributed some of the strength to spending on artificial intelligence and a small, temporary boost from the annual budget.
