Bank of England Raises Interest Rates to 4% in First Hike Since 2023

The Bank of England raised its main interest rate to 4% on Thursday, November 5, 2026, its first increase since August 2023. The Monetary Policy Committee voted 8–1 to lift Bank Rate by a quarter point from 3.75%, saying that high energy prices tied to the conflict in the Middle East risk pushing UK inflation higher for longer. Governor Andrew Bailey signalled that at least one more rise is likely if the conflict continues.

What did the Bank of England decide?

The committee met in the days before the announcement and concluded its meeting on November 4. It raised Bank Rate by 0.25 percentage points to 4%.

Eight of the nine members voted for the quarter-point increase: Governor Andrew Bailey, Sarah Breeden, Swati Dhingra, Megan Greene, Clare Lombardelli, Huw Pill, Dave Ramsden and Alan Taylor. The ninth member, Catherine Mann, voted for a bigger half-point rise that would have taken the rate to 4.25%.

According to Reuters, economists had expected any dissent to come from members wanting to hold rates steady, so a vote for a larger move went against that expectation.

Why did the Bank raise rates?

The Bank’s main concern is inflation. UK consumer price inflation was 3.5% in September, well above the 2% target. The Bank said energy prices have risen sharply because of the conflict involving the United States and Iran, and that the danger of so-called second-round effects has increased. Those happen when higher energy bills feed into wider prices and wage demands.

Bank staff now expect inflation to rise to about 4.5% in the first quarter of 2027 and about 5% in the second quarter. Reuters reported that the Bank’s central projection peaks at 4.8% in the second quarter of 2027. In a more severe scenario, with oil near $130 a barrel compared with about $100 now, inflation could reach 6.2% in the third quarter of 2027.

The Bank does not expect inflation to return to its 2% target until the third quarter of 2028, six months later than it forecast in July.

The economy has also held up better than expected, which gives the Bank more room to tighten policy. It raised its growth forecasts to 1.6% for this year and 1.3% for next year.

Key details

• New Bank Rate: 4%, up from 3.75%.
• Vote: 8–1, with one member wanting a 0.5-point rise.
• Last rise before this: August 2023.
• September inflation: 3.5%.
• Return to 2% target: expected in the third quarter of 2028.

What did Andrew Bailey say?

Bailey said at least one further increase is likely if the conflict continues. He also tried to calm fears of a long run of hikes. Reuters quoted him saying the rise should not be seen as “the first in an inevitable long sequence of hikes.”

The Bank’s own summary made the same point, stating that “Monetary policy is not on a pre-set path.”

Members of the committee were divided on what comes next. Greene and Pill signalled support for more tightening, while Dhingra and Taylor said they wanted to see more evidence first. Financial markets are pricing in three further quarter-point increases during 2027, Reuters reported.

Why it matters

A higher Bank Rate usually means higher borrowing costs for households and businesses. People on tracker and variable-rate mortgages tend to see payments rise soon after a change, while new fixed-rate deals are priced on market expectations for future rates. Savers may see slightly better returns.

Reuters described the decision as a setback for new Prime Minister Andy Burnham, whose government faces higher borrowing costs and pressure on household budgets.

The move also shows how an energy price shock can force policymakers to change course quickly.

What happens next?

The Bank’s next steps depend heavily on energy prices and the course of the Middle East conflict. If oil and gas stay high or rise further, more increases are likely in 2027. If the conflict eases and energy prices fall, the committee may decide that one rise is enough. Data on inflation, wages and growth over the coming months will shape the next decision.