LONDON — The Bank of England is expected to raise interest rates on Thursday for the first time in more than three years, as higher energy costs push up inflation and the central bank decides it cannot afford to wait for stronger evidence of lasting price pressures. The Monetary Policy Committee announces its decision at 12:00 GMT (5:30 pm in India), alongside its latest Monetary Policy Report.
Economists polled by Reuters expect Bank Rate to rise by a quarter of a percentage point, from 3.75% to 4%. Financial markets are pricing in a hike with near certainty. It would be the first increase since August 2023.
How the Bank got here
Bank Rate has been 3.75% since the Bank’s last cut in December 2025, when the committee reduced it from 4% by a narrow 5–4 vote. At the time, policymakers expected borrowing costs to continue drifting down. Then the conflict involving Iran sent energy prices sharply higher, and the picture changed.
Since the spring, the Bank has kept rates on hold while a growing minority argued for an increase. In April, one member voted to raise rates. By June it was two, and in July and September three members, Megan Greene, Catherine Mann and Huw Pill, voted for a hike, leaving the committee split 6–3. In September, Governor Andrew Bailey warned that the longer energy volatility persisted, the more likely the Bank would need to act. The Reuters poll suggests Thursday’s vote could be 7–2 in favour of a rise.
Why inflation is the concern
UK consumer price inflation reached 3.5% in September, above the Bank’s own forecast and well above its 2% target. Higher energy costs are the main driver, feeding into petrol, household bills and the cost of doing business.
Bailey has argued that the committee cannot wait for definitive proof that higher inflation is becoming embedded in wages and prices, because by then the Bank would be responding too slowly. He has also said that businesses appear to be absorbing more of the rise in costs than they did during the surge of 2022, which could be a mildly reassuring sign. Still, most members appear to take the view that raising rates now is the safer course.
A wrinkle: oil prices have fallen
The timing creates an interesting twist. Oil prices fell sharply this week after the US midterm elections, with Brent crude dropping below $95 a barrel, a two-month low, on hopes of a de-escalation in the Middle East. If that decline holds, it could ease some of the pressure behind the Bank’s decision. Committee members, however, are likely to want more than a single week of lower prices before changing course, and the decision was largely settled before the latest moves.
What it means for borrowers and savers
A rise to 4% will have the most immediate effect on households with tracker mortgages and those on lenders’ standard variable rates, which typically move within weeks of a Bank Rate change. People coming off fixed-rate deals will find refinancing more expensive, although many lenders had already priced in the increase when setting new fixed rates. Savers may see better returns over time, though banks are often slower to pass on rate increases than rate cuts.
Anyone worried about repayments is generally advised to speak to their lender early, check whether overpaying or switching deals makes sense, and review their budget. This is general information and not personal financial advice.
What the Bank might say next
The most important message may be about the future rather than the present. Markets have been betting on several more increases through 2027, and the Bank may try to push back against that expectation. Its new forecasts, vote split and guidance will show whether this is a one-off, defensive step or the start of a broader tightening cycle. The committee’s next scheduled decision is on 17 December.
The Bank of England is not alone in confronting energy-driven inflation: central banks from Australia to the euro area have also raised rates this year. How Bailey and his colleagues describe the road ahead will be watched closely by households, businesses and traders alike.
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