Bank of England Raises Rate to 4% in 8-1 Vote, Sees 5% Inflation

The Bank of England raised interest rates for the first time since August 2023 on Thursday, Nov. 5, lifting Bank Rate by 0.25 percentage point to 4%. The Monetary Policy Committee (MPC) voted 8-1 at its meeting ending Nov. 4, the Bank said in its Monetary Policy Summary, published at 12:00 GMT. Markets had priced in more than a 99% chance of a hike, CNBC reported.

How did the Bank of England vote?

The vote was 8-1, with the lone dissenter wanting a bigger move. Governor Andrew Bailey, Sarah Breeden, Swati Dhingra, Megan Greene, Clare Lombardelli, Huw Pill, Dave Ramsden and Alan Taylor voted for the quarter-point rise to 4%. Catherine L Mann voted for a half-point rise to 4.25%, according to the Bank.

Option	Votes	Members
Raise 0.25 point to 4%	8	Bailey, Breeden, Dhingra, Greene, Lombardelli, Pill, Ramsden, Taylor
Raise 0.5 point to 4.25%	1	Mann

In the minutes, Bailey said, "There has been a material further increase in energy prices," and that "the case is clear for a 25-basis point rise now." Mann said that "from a risk management and credibility perspective, a 50-basis point hike in Bank Rate is 'good policy,'" the minutes show.

Why did the Bank of England raise rates?

Energy costs. "The conflict in the Middle East is now in its ninth month," the Bank said, and "global energy prices have continued to rise from an already elevated level." It said there is still "limited evidence of knock-on effects on other prices and wages," but that "the degree of inflationary pressure in the pipeline is now sufficient to warrant an increase in Bank Rate."

UK CPI inflation rose to 3.5% in September, the Bank said. It now expects inflation to rise to around 5% by the middle of next year, with staff projecting roughly 4.5% in the first quarter of 2027 and about 5% in the second.

Will the Bank of England raise rates again?

It has not committed either way. "Monetary policy is not on a pre-set path," the Bank said, adding that it "will adjust Bank Rate as necessary" to return inflation to its 2% target. Greene, Lombardelli and Pill signaled further increases may be needed, depending on energy prices and pay and price pressures. Taylor called the move "not the start of a hiking cycle" and said, "The next move could be up, down, or sideways."

Bailey said that without "real progress towards settling the conflict in the Middle East," risks to inflation are "to the upside," CNBC reported. Traders priced roughly a one-in-four chance of another hike in December, CNBC said. The next decision is due Thursday, Dec. 17, according to the Bank.

How did sterling and gilts react?

Gilt yields edged higher. The 10-year gilt yield was up about 2 basis points at 5.15%, and the two-year yield rose about 4 basis points to 4.78%, CNBC reported. The pound was near $1.346 at 13:53 GMT, little changed from $1.347 late Wednesday, according to Yahoo Finance data. The FTSE 100 traded near 10,914 at 13:38 GMT, up about 0.8% from Wednesday's close, Yahoo data show.

The hike follows the Reserve Bank of Australia's move this week; read our story on the RBA raising its cash rate to 4.85%. Energy prices are central to the outlook: see our report on oil's 8.7% plunge on Wednesday and follow more economy news and energy market news.