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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. The 8–1 decision came as September inflation stood at 3.5% and the Bank projected it could reach around 5% by the middle of 2027, largely because of higher energy prices.
The Bank of England raised Bank Rate by 0.25 percentage points to 4% on 4 November, as higher global energy prices lifted the outlook for UK inflation. The Monetary Policy Committee voted 8–1 for the increase; one member preferred a larger rise to 4.25%.
The committee said UK consumer price inflation was 3.5% in September and was expected to rise to around 5% by the middle of 2027. It expects inflation to fall later as the effects of energy prices on annual inflation measures fade and restrictive monetary policy weighs on price pressures. The Bank’s stated medium-term inflation target remains 2%.
The minutes identify the prolonged conflict in the Middle East and its effect on global energy prices as the main uncertainty for the inflation outlook. Over the 15 UK working days ending 27 October, the front-month Brent crude futures contract averaged $108 a barrel, while the UK front-month natural gas contract averaged 216 pence per therm. Those levels were 38% and 81% above their respective averages at the time of the July Monetary Policy Report.
The Bank said higher energy costs were already contributing directly to inflation and would continue to affect household and business bills. It reported limited evidence so far that those costs had spread more widely to other prices and wages. The committee nevertheless judged that the inflationary pressure in the pipeline, alongside activity data that had generally been stronger than expected, supported a modest rate increase.
How the Rate Rise Affects Borrowing
Bank Rate is the Bank of England’s main policy rate and influences borrowing costs across the UK economy. A higher rate can feed into mortgage, loan and business financing costs, although the effect and timing depend on the product and lender. Savers may also see changes to rates on some deposit accounts.
The decision signals that the MPC is responding to the risk that an energy shock could become more persistent inflation. The Bank cannot set global oil or gas prices. Its concern, as set out in the minutes, is whether higher costs spread into wider prices and pay, making inflation harder to bring back to target. The committee also acknowledged a trade-off: tighter policy can weigh on economic activity as it seeks to limit inflation.
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Why Energy Prices Shaped November’s Vote
The MPC met as the Middle East conflict entered its ninth month, with energy prices rising from an already elevated level. The minutes say energy prices remained sensitive to geopolitical developments. A sustained de-escalation could bring prices down, while continued conflict, wider regional escalation or further damage to refining capacity could keep them higher than current futures prices imply.
Direct energy effects accounted for about 1 percentage point of September’s 3.5% CPI inflation, mostly through fuel, according to the minutes. The committee noted that indirect effects on other consumer prices had so far been limited and food inflation had been lower than expected earlier in the year. Some businesses had not yet faced major increases in gas and electricity costs because of hedging or fixed-price contracts; others were absorbing some added costs through lower profit margins.
How Far Energy Costs Will Spread
The scale and duration of the energy shock remain uncertain. The minutes say it is not yet clear whether limited indirect price effects reflect firms absorbing higher costs or a delay before those costs reach consumers. Businesses’ ability to keep absorbing costs, and whether they later rebuild profit margins through higher prices, will affect the inflation outlook.
The Bank also said it would monitor underlying pay, firms’ pricing behaviour and spare capacity in the economy. The available source material does not establish how high energy prices will remain, how quickly they will affect household bills, or whether further rate changes will follow this decision.
Evidence Before the December Decision
The next Bank Rate decision is due on 17 December 2026. Before then, the MPC says it will assess incoming evidence, especially whether elevated energy prices are feeding through to prices and wages beyond their direct effect on energy bills. It will also consider economic activity and spare capacity.
The committee has not set a predetermined path for rates. Its next move will depend on how those indicators develop and on the inflation outlook at the time of its next meeting.
Key Questions
What is the new Bank Rate?
Bank Rate is 4%, after the Bank of England raised it by 0.25 percentage points at the MPC meeting ending 4 November 2026.
How did the committee vote?
The vote was 8–1 for a rise to 4%. One member preferred a 0.5-point increase, which would have taken the rate to 4.25%.
Why did the Bank raise rates?
The MPC cited rising global energy prices, the risk of wider inflationary effects and economic activity that had generally been stronger than expected. September CPI inflation was 3.5%.
What happens to inflation next?
The Bank expects inflation to rise to around 5% by the middle of 2027, then fall as energy-related effects fade and monetary policy bears down on inflation. That is a projection, not a guaranteed outcome.
When is the next Bank Rate decision?
The next decision is due on 17 December 2026. The MPC says it will decide based on evidence available at that meeting, including developments in energy prices, pay and business pricing.
Source: bankofengland.co.uk
