Bank of England Raises Rates to 4%, First Hike Since 2023

The Bank of England raised interest rates on Thursday, lifting its benchmark rate to 4% in the first increase in more than three years.

The Monetary Policy Committee voted 8-1 for the quarter-point rise, from 3.75%. Catherine Mann, the one dissenter, wanted a bigger move, to 4.25%.

The Bank pointed to energy prices. The conflict in the Middle East is in its ninth month, and the Bank said the pressure on prices in the pipeline was enough to warrant the increase. It warned at least one more rise was likely if the conflict continues.

Inflation is the problem. Consumer prices rose 3.5% in the year to September, the highest in 11 months, up from 3.1% in August. The Bank now expects inflation to reach around 5% by the middle of next year, more than double its 2% target.

What it means for borrowers

The rate sets what the Bank charges other banks to borrow, and it feeds through to mortgages, loans and savings. The Bank’s own forecasts put the rate at 4.75% by Christmas 2027.

The pound barely moved after the announcement, trading at $1.3471 at 12:14 p.m. London time.

A turn after six holds

The Bank had held the rate steady six times in a row. In September it kept the rate at 3.75% by a 6-3 vote, with three members already wanting 4%. Thursday’s vote showed the committee had moved.

The rise takes the rate back to where it stood in August 2025, reversing the cut made last December. It is still well below the 5.25% peak reached in 2023.

The committee meets again on Dec. 17.