Bank Rate rises to 4 percent as energy costs fuel inflation
An 8–1 vote at the Bank of England raises Bank Rate by 25 basis points to 4 percent. The Bank projects inflation of 4.9 percent in 2027 Q2 as higher energy costs increase pressure on household bills and business prices.
Higher rates before broader pass-through
The Bank of England (BoE) Monetary Policy Committee raised Bank Rate at its meeting ending November 4, 2026.
One member preferred a 50 basis point increase to 4.25 percent.
CPI inflation rose from 2.6 percent in June to 3.5 percent in September, exceeding July's forecast by 0.4 percentage points.
The Middle East conflict, now in its ninth month, has raised energy costs, but evidence of broader wage and price effects remains limited.
The MPC judged pipeline inflation pressure sufficient to act.
Stronger activity and stabilising labour market slack reinforced the decision: GDP grew 0.5 percent in 2026 Q2, with 0.7 percent projected for Q3. Unemployment fell to 4.7 percent in the three months to August.
Three paths through the energy shock
Conditioned on market interest rates, the central forecast returns inflation to the 2 percent target in 2028 Q3; GDP growth slows to 1.0 percent in 2027 Q4. In the adverse scenario, higher energy prices and stronger wage-price effects leave inflation at 2.2 percent in 2029 Q4. Weaker demand, with no second-round effects, lowers it to 1.2 percent.
Illustrative policy rules imply tighter policy for the adverse case and looser policy for weaker demand, not prescribed rate paths.
Budget measures reduce inflation by 0.25 percentage points in 2027 Q2.
Persistence determines the policy path
The MPC is acting against the risk of persistent inflation, rather than established broad-based second-round effects.
It will monitor underlying pay, pricing behaviour and slack at each meeting.
Bank Rate has no preset path; the Committee will adjust it to restore the 2 percent target.
Source: Monetary Policy Report - November 2026
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