By Sohaib Shams
The Bank of England is expected to raise interest rates on Thursday, November 5, 2026, for the first time in over three years to counter an inflation shock driven by the Iran war.
Rate hike expected
Economists anticipate the nine-member Monetary Policy Committee will lift the key rate to 4% from 3.75%, marking the first increase since August 2023.
Inflation surge
UK inflation climbed to an 11-month high of 3.5% in September, well above the 2% target, largely due to soaring fuel costs caused by the Iran war and resulting bottlenecks in the Strait of Hormuz that have tightened global oil and gas supplies.
Economic outlook
“We imagine that many committee members’ patience with the recent rise in inflation has worn thin,” said Ellie Henderson, an economist at Investec. “The longer energy prices remain elevated, the greater the risk that a temporary price shock becomes more permanent.”
The rate decision will be accompanied by the Bank’s quarterly economic projections for inflation and growth. Higher borrowing costs aim to cool spending and price pressures but may also weigh on economic growth. Other major central banks, including the U.S. Federal Reserve and the European Central Bank, have recently raised rates for similar reasons. UK rates had been declining from a 15-year peak of 5.25% until the U.S. and Israel attacked Iran in late February.
