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The Bank of England’s Monetary Policy Committee raised Bank Rate by 0.25 percentage points to 4% at its meeting ending 4 November 2026. The decision followed higher global energy prices and a rise in UK inflation to 3.5% in September; the Bank expects inflation to reach around 5% by the middle of 2027, while saying the outlook remains uncertain.
The Bank of England raised Bank Rate by 0.25 percentage points to 4% after a meeting ending on 4 November 2026, as higher global energy prices intensified the inflation outlook. The Monetary Policy Committee (MPC) voted 8–1 for the increase; one member preferred a larger rise to 4.25%.
The Bank said UK consumer price inflation reached 3.5% in September and is now expected to rise to about 5% by the middle of 2027. It expects inflation to fall later as the effect of higher energy prices on annual comparisons fades and restrictive monetary policy weighs on price pressures. The Bank’s stated medium-term target remains 2% CPI inflation.
The Committee said higher energy costs were already affecting household and business bills, but there was still limited evidence of knock-on effects on other prices and wages. It judged that inflationary pressure in the pipeline was sufficient to warrant a rate increase. Recent UK activity data had also generally been stronger than expected, adding to the case for tighter policy.
The minutes describe the decision as a response to risks around the duration of the energy shock and the chance that cost increases become persistent. The MPC said it would judge future decisions meeting by meeting, examining underlying pay, firms’ pricing behaviour and the amount of spare capacity in the economy. It did not set out a fixed path for future rates.
How the Rate Rise Affects Borrowing
A higher Bank Rate can raise the cost of some borrowing, including mortgages and business loans, although the effect on individual products depends on lenders, contract terms and market pricing. Borrowers on tracker products linked to Bank Rate may see changes more directly; people with fixed-rate deals generally face the impact when they refinance or take out a new loan.
The decision also reflects a policy trade-off described in the minutes: the Bank cannot set global energy prices, but it can try to prevent those costs from feeding into wider, persistent inflation. Higher rates may restrain demand and pricing pressure, while also weighing on household spending and business activity. The source does not quantify the likely effect of this specific increase on either inflation or growth.
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Energy Shock Shapes November Decision
The Bank linked the inflation outlook chiefly to the conflict in the Middle East, which it said was in its ninth month, and the resulting rise in global energy prices. In the 15 UK working days to 27 October, the front-month Brent crude oil futures contract averaged $108 a barrel, while the UK front-month natural gas contract averaged 216 pence per therm. The minutes said those averages were 38% and 81% above their respective levels at the time of the July Monetary Policy Report.
The September inflation figure included an estimated contribution of about 1 percentage point from direct energy effects, most of it from fuels. The minutes said there had so far been little sign that higher energy costs had pushed up other consumer prices, and food inflation had been lower than expected earlier in the year. Some firms had been shielded from immediate increases by hedging or fixed-price contracts, while others were absorbing costs through lower margins, according to the Bank’s account of agency intelligence.
The Committee cautioned that such buffers may not last. Whether firms eventually pass costs on to consumers depends partly on how long energy prices stay high and whether businesses can absorb expenses or rebuild margins. The Bank said a sustained easing of the conflict could bring prices down, while continued fighting, wider regional escalation or further damage to refining capacity could keep them higher.
Pass-Through to Prices Remains Unclear
The duration and scale of the energy shock remain uncertain, as do the extent and timing of any indirect effects on consumer prices and wages. The minutes raise the possibility that weak pass-through so far reflects delayed effects rather than a lasting change in how firms respond to costs. They also note that some businesses have not yet faced the full rise in energy bills because of existing contracts.
The Bank’s inflation outlook is conditional on assumptions about energy prices and the economy. The source says inflation is expected to reach around 5% by mid-2027, but it does not provide certainty that this peak will occur or quantify how much the rate increase will change that path. The supplied material also does not specify the exact rate votes beyond the 8–1 result and the dissenting member’s preference for 4.25%.
Next Decision Due in December
The MPC’s next scheduled Bank Rate decision is due on 17 December 2026. Before then, the Committee says it will monitor energy prices and the evidence on underlying pay, business pricing and economic slack. Those indicators will help determine whether higher energy costs are spreading into broader inflation or whether the direct effects are likely to fade.
The Bank has not signalled a predetermined move at the December meeting. The next decision will depend on the evidence available then, including how the energy shock develops and whether inflationary pressure appears persistent enough to require further action.
Key Questions
What is the new Bank of England interest rate?
Bank Rate is 4%, following a 0.25 percentage-point increase announced after the MPC meeting ending 4 November 2026.
How did the committee vote?
The vote was 8–1 in favour of the increase to 4%. One member preferred a larger increase, to 4.25%.
Why did the Bank raise rates?
The MPC cited rising global energy prices, UK inflation of 3.5% in September and risks that cost pressures could feed into broader prices and wages. It also said recent activity data had generally been stronger than expected.
What does the Bank expect inflation to do?
The Bank expects inflation to rise to about 5% by the middle of 2027, then fall as the direct effect of higher energy prices fades and monetary policy bears down on inflation. This is an outlook, not a guaranteed outcome.
When is the next Bank Rate decision?
The next scheduled decision is due on 17 December 2026. The MPC has said future rate decisions will depend on incoming evidence, rather than follow a pre-set path.
Source: bankofengland.co.uk
