All nine BoE members vote for rate increase to 4%

• The Bank Rate now stands at 4.00%, in line with market expectations.
• The previous rate was 3.75%.
• The vote was 9–0, compared with an expected 7–2 split.
• A single committee member voted for a half-percentage-point rise, which would have taken the rate to 4.25%.
• September's CPI inflation figure was 3.5%, and the Bank forecasts it will approach 5% halfway through next year.
• Although higher energy costs are clearly feeding into business and household bills, there is still scant proof of spillover into other prices and wages.
• Recent economic activity figures have mostly surpassed forecasts, strengthening the argument for a slight tightening of policy.
• The Monetary Policy Committee is not following a predetermined course.
• At each meeting, the Committee will evaluate the evidence, especially the risk of energy price pass-through to the wider economy, by tracking wage trends, pricing decisions, and spare capacity.
• The Bank Rate will be adjusted as needed to bring CPI inflation back to the 2% objective over the medium term.
• Access the full statement

In a widely anticipated move, the Bank of England increased its benchmark rate by 25 basis points to 4.00%, driven by growing worries over inflation sparked by the Middle East conflict. The vote was 8–1, with a single policymaker favouring a 50-basis-point rise that would have set the rate at 4.25%.

The central bank highlighted that UK CPI inflation climbed to 3.5% in September and is projected to move toward 5% by mid-2027, owing to the ongoing surge in global energy costs. While the immediate effect on household and corporate energy expenses is evident, the MPC noted that substantial knock-on impacts on wages and other prices have yet to materialise.

Nonetheless, committee members concluded that the inflationary forces accumulating in the pipeline justified a rate hike. Recent economic data, which have consistently beaten expectations, further supported a tighter policy stance.

The Bank emphasised that its policy is not predetermined; decisions will be taken meeting by meeting. The Committee will focus on core wage growth, corporate pricing strategies, and spare capacity to gauge whether energy price increases are seeping into general inflation. Such an approach suggests the MPC aims to remain flexible and not commit to a long tightening cycle.

Nevertheless, the minutes revealed a fairly hawkish discussion inside the MPC. Lombardelli and Pill saw grounds for additional increases in the near future; Pill argued that one 25-basis-point rise is probably not enough. Greene also said further tightening would likely be needed, and Mann cautioned that the current economic backdrop makes second-round inflation effects more problematic.

Conversely, Taylor and Dhingra considered the latest increase mostly as insurance against even worse inflation. Governor Bailey noted that the recent climb in market rate assumptions partly stems from elevated risk premia, not from expectations of more tightening, and maintained that existing monetary settings are roughly right.

The Bank increased its GDP growth prediction for 2027 to 1.3%, up from 1.1%, but cautioned that the economy is expected to soften in the quarters ahead. The jobless rate is projected to hit 5.1% in 2028, slightly down from the prior forecast of 5.2%, and private-sector regular wage growth is seen staying fairly robust at 3.5% in the fourth quarter of 2027.

On balance, the move indicates that the BoE is growing more worried that energy-led inflation could become embedded, yet it stays cautious because second-round effects are scarce. Nonetheless, traders boosted their wagers on further tightening and now see a 50% probability of another rate rise in December.