Bank of England hikes to 4%, sees inflation near 5%
In short
- The Bank of England raised Bank Rate from 3.75% to 4% on Thursday – its first rise since 2023 – on an 8–1 vote.
- It expects inflation to peak at an average 4.8% in the second quarter of 2027; Governor Bailey said another hike “seems likely” unless the Middle East conflict is resolved.
- At 06:40 Sofia time €1 was worth £0.834 and the pound about $1.346; European stocks closed Thursday down 0.4–0.5%, before Wall Street’s fall.
The Bank of England raised Bank Rate by 0.25 points to 4% – its first increase since 2023 – and warned that inflation will approach 5% by the middle of next year. The decision came on Thursday 5 November; this morning markets are reading it alongside the chip rout on Wall Street.
What happened
The committee voted 8–1: Catherine Mann wanted a half-point rise to 4.25%. The Bank’s central forecast has inflation peaking at an average 4.8% in the second quarter of 2027 and returning to 2% only in the third quarter of 2028. In an adverse scenario with oil near $130 a barrel, inflation reaches 6.2% in the third quarter of 2027. Growth forecasts were raised to 1.6% this year and 1.3% next.
Bailey said the move “should not be seen as the first in an inevitable long sequence of hikes”, but that unless the Middle East conflict is resolved another increase “seems likely”. Deputy Governor Clare Lombardelli said a further hike is likely to be needed in the near term. Two-year gilt yields rose by about 4 basis points.
HawkValue data at 06:40: €1 was worth £0.834 and $1.122, which puts the pound at about $1.346. European stocks closed Thursday before Wall Street’s fall: the FTSE 100 at 10,783 (−0.43%), the DAX at 26,325 (−0.43%) and the Euro Stoxx 50 at 6,232 (−0.55%). The S&P 500 closed later, down 4.36%, so this morning’s European open is the first chance for those markets to react. The ECB held its rate at 2.5% on 29 October, which leaves the gap to Bank Rate at 1.5 points.
What it means for you
The maths: if your mortgage tracks Bank Rate, the extra 0.25 points on £200,000 of borrowing is £500 a year – about £42 a month (interest only; repayment loans differ). On £10,000 in a savings account that passes the full rise on, it is £25 a year. A fixed rate changes only when it is renewed.
For readers abroad: €1,000 is £834 at today’s rate. The gap to the euro zone matters for sterling, but the exchange rate also reacts to oil, the dollar and risk mood. Live prices: {{/uk/stock-market-uk/|stocks}}, {{/uk/gold-prices-uk/|gold}} and {{/uk/guides-uk/|guides}}.
Bottom line
The Bank of England raised rates and said itself that further steps depend on oil and the Middle East. The exchange rates and index levels here are a snapshot of one moment, not a forecast.
Sources: CNBC · Reuters · Bank of England · CNBC (ECB) · HawkValue data at 06:40 and Thursday’s closes.
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