Bank of England raises rates for first time since 2023, warns more likely
TLT•The Bank of England raised its key rate to 4% from 3.75% in an 8-1 vote and said another increase is likely if the US-Iran conflict continues. It forecasts inflation peaking at 4.8% in the second quarter of 2027.
1. Rate decision
The Bank of England raised interest rates to 4% from 3.75%, its first increase since August 2023. The Monetary Policy Committee voted 8-1, with Catherine Mann seeking a larger, half-point increase.
2. Further increases possible
Governor Andrew Bailey said at least one more increase was likely if the Middle East conflict continues, but cautioned that the decision did not signal an inevitable long sequence of hikes. Some economists said December's decision could go either way, depending on oil and natural gas prices.
3. Inflation and growth outlook
The BoE expects inflation to peak at 4.8% in the second quarter of 2027 and return to its 2% target in the third quarter of 2028. Its central forecast puts growth at 1.6% this year and 1.3% next year; in a more adverse scenario, with oil near $130 a barrel, inflation reaches 6.2% in the third quarter of 2027.
