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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, with an 8–1 majority. The Bank expects inflation to rise to around 5% by mid-2027 as energy costs feed through, but says the outlook depends on how those costs affect prices, wages and economic activity.
The Bank of England raised Bank Rate to 4% on 4 November, after its Monetary Policy Committee voted 8–1 for a 0.25-percentage-point increase. The decision responds to rising energy costs and the Bank’s expectation that UK inflation will climb further, affecting borrowing costs and household and business finances.
One committee member voted for a larger increase of 0.5 percentage points, to 4.25%. The Bank said UK consumer price inflation was 3.5% in September and is now expected to reach around 5% by the middle of 2027. It projects inflation will then ease as the effect of higher energy prices drops out of annual comparisons and restrictive monetary policy weighs on price pressures.
The Bank identified the prolonged conflict in the Middle East and rising global energy prices as the main sources of uncertainty for the inflation outlook. Its minutes report that, over the 15 UK working days ending 27 October, front-month Brent crude futures averaged $108 a barrel, while UK front-month natural gas futures averaged 216 pence per therm. Those averages were 38% and 81% higher, respectively, than at the time of the July Monetary Policy Report.
The committee said direct energy costs were already affecting inflation, but it had seen limited evidence so far that those costs had spread to other consumer prices and wages. Members judged that the pipeline of inflationary pressure nevertheless warranted a rate rise. They also said economic activity data in recent months had generally been stronger than expected.
How the Rate Rise Affects Borrowing
Bank Rate influences the cost of borrowing across the UK economy. A higher policy rate can feed into mortgage, loan and business financing costs, although the timing and scale of changes depend on lenders, products and individual circumstances. Savers may also see changes to deposit rates, but those are not automatic or uniform.
The decision signals that the MPC is concerned about inflation becoming persistent if energy costs pass through into a wider range of prices or wages. The committee’s account also points to a trade-off: it wants inflation to return to target without overlooking the risk that tighter policy could weigh on economic activity. The minutes do not quantify how much the rate increase will affect inflation or growth.
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Energy Shock Shapes November Decision
The MPC is responsible for setting Bank Rate to help return consumer price inflation to the government’s 2% target in the medium term. At this meeting, it assessed how the energy shock might affect both current inflation and price-setting over time. Monetary policy cannot change global oil and gas prices, the committee said, but it can influence domestic demand and help limit persistent second-round effects.
September’s inflation figure included an estimated one percentage point from direct energy effects, most of it linked to fuels. The minutes say those direct contributions were expected to build over the following quarters before falling back, based on futures-price assumptions. At the same time, some businesses had not yet faced large increases in gas and electricity costs because of hedging or fixed-price contracts. Bank intelligence indicated that some firms were absorbing higher costs through lower profit margins.
How Far Energy Costs Will Spread
The scale and duration of the energy shock remain uncertain. The minutes say prices could fall if the Middle East conflict de-escalates in a credible and sustained way, but continued fighting, wider regional escalation or further damage to refining capacity could keep prices higher than current futures curves imply. The Bank also reported that energy supply buffers had been drawn down during 2026, which could amplify price pressures.
It is not yet clear whether the limited indirect inflation seen so far reflects weaker pass-through or a delay. Some firms have been protected temporarily by contracts or hedging, while others have absorbed costs through reduced margins. How long they can do so, and whether they later raise prices or wages, remains unresolved. The source material does not specify the exact path of Bank Rate after this decision.
Evidence Before the December Decision
The next Bank Rate decision is scheduled for 17 December 2026. Before then, the MPC says it will monitor underlying pay, firms’ pricing behaviour and spare capacity in the economy, alongside developments in energy prices and the extent of any knock-on effects. The committee has not committed to another increase: it says future decisions will depend on the evidence available at each meeting.
Key Questions
What is the new Bank Rate?
The Bank of England raised Bank Rate to 4%, up 0.25 percentage points from its previous level.
How did the MPC vote?
Eight members supported the 0.25-point increase. One member voted for a larger increase, taking Bank Rate to 4.25%.
Why did the Bank raise rates?
The MPC cited rising global energy prices, inflation of 3.5% in September and an outlook in which inflation could reach around 5% by mid-2027. It also said recent activity data had generally been stronger than expected.
When is the next rate decision?
The next decision is due on 17 December 2026. The MPC says it will review incoming evidence rather than follow a pre-set rate path.
Source: bankofengland.co.uk
