Bank of England Raises Bank Rate to 4% in First Hike Since 2023, Says Another Rise May Be Needed

SentiSense · Published Nov 5, 2026, 7:33 AM ET · Updated Nov 5, 2026, 1:55 PM ET

The Bank of England's Monetary Policy Committee voted 8-1 on November 5, 2026 to raise Bank Rate by 25 basis points to 4%, its first increase since 2023. Citing inflationary pressure from higher energy prices, the Bank expects inflation to climb further in 2027, to around 5% by mid-year from 3.5% in September. Governor Andrew Bailey said the move should not be read as the start of a long sequence of hikes, while signalling that a further rise may be needed.

The Bank of England raised Bank Rate by 0.25 percentage points to 4% on November 5, 2026, lifting borrowing costs for the first time since 2023; the previous increase came in August 2023. The Monetary Policy Committee voted 8-1: Governor Andrew Bailey and seven colleagues backed the quarter-point move, while Catherine Mann dissented in favour of a larger half-point rise to 4.25%, according to the Bank's published minutes. The decision reverses part of an easing cycle that had taken Bank Rate down to 3.75% by December 2025.

The trigger is energy. Bailey said there is now enough inflationary pressure in the pipeline from the rise in energy prices to warrant an increase, and the Bank tied the outlook to the Middle East conflict. UK CPI inflation reached 3.5% in September, and the Bank expects it to climb further in 2027, reaching around 5% by the middle of the year in its projections before falling back. Reuters reported the central scenario peaking at 4.8% in the second quarter of next year.

The guidance is deliberately two-sided. Bailey said the hike should not be seen as the first in an inevitable long sequence, and the Bank stressed that policy is not on a pre-set path, yet he also told reporters he could see the argument for a further increase. Committee members split publicly: Clare Lombardelli and Megan Greene pointed to likely further rises, while Alan Taylor said this is not the start of a hiking cycle. Markets read it as hawkish at the margin: two-year gilt yields rose a few basis points to around 4.77%, sterling was little changed, and Reuters reported traders pricing about 76 basis points of further tightening by end-2027, up from about 67 before the decision.

What to watch: the next decision is due on December 17, 2026. October CPI, energy prices and any de-escalation in the Middle East will decide whether the Bank follows through, with knock-on effects for UK mortgage rates, gilt-heavy portfolios and sterling-exposed equities.