By Fatma Younis
The Bank of England is widely expected to raise interest rates on Thursday for the first time since August 2023, increasing the benchmark from 3.75% to 4.0% as policymakers respond to accelerating inflation.
Consumer Price Index inflation rose to 3.5% in September, the highest level in 11 months, driven largely by surging petrol and diesel prices linked to the Middle East conflict. Ofgem’s energy price cap increased 3.6% in October and is forecast to jump a further 22% in January, adding to price pressures.
Investec analyst Ellie Henderson said the Monetary Policy Committee’s patience with rising inflation has worn thin, describing a potential hike as a "risk management" move. Oxford Economics’ Alexander Harvey called a November increase a "done deal" and noted markets anticipate further tightening into 2027.
The decision follows a rate hike by the US Federal Reserve last month. Supporting the case for tighter policy, UK unemployment fell to 4.7% in the three months to August, while the economy grew 0.1% that month despite consumer spending pressures.
