Bank of England raises Bank Rate to 4.0% in first hike in three years as energy shock lifts 2027 inflation outlook

AI-generated editorial illustration: a heating radiator block and classical column capital on a stone slab, a blank policy folder and brass weights represent monetary-policy tightening and energy inflation pressures, not an actual scene.

An 8–1 vote lifts Bank Rate to 4.0% as wholesale oil and gas curves push up near-term CPI projections

At its meeting ending on November 4, 2026, the Bank of England Monetary Policy Committee (MPC) voted by an 8–1 majority to increase Bank Rate by 0.25 percentage points from 3.75% to 4.0%, publishing its minutes and the November 2026 Monetary Policy Report on November 5; the decision marks the first UK interest rate increase in three years since August 2023. Eight members, including Governor Andrew Bailey, backed the 25-basis-point increase, while external member Catherine L Mann dissented in favor of a 50-basis-point hike to 4.25%, citing five years of above-target inflation averaging 4.7% and the risk of embedded inflation premia. As of November 4, the stock of UK government bonds held for monetary policy purposes stood at £362 billion.¹²

The policy shift follows renewed global energy price pressures as the conflict in the Middle East entered its ninth month. Over the 15 UK working days to October 27, 2026, front-month Brent crude futures averaged $108 per barrel, 38% above the July 2026 report conditioning assumption, while UK National Balancing Point (NBP) front-month natural gas futures averaged 216 pence per therm, up 81% from July. Office for National Statistics figures show UK headline CPI inflation rose to 3.5% year on year in September 2026 from 3.1% in August, with retail petrol and diesel averaging 169.5 pence and 192.5 pence per litre and motor fuel CPI up 29.8%. Even after incorporating the temporary removal of VAT on household electricity bills from October 2026, the Ofgem household energy price cap rose from £1,663 in Q3 2026 to £1,723 in Q4 2026 and is projected to reach roughly £2,150 in Q1 2027.¹²³

Three conditioning scenarios and internal MPC disagreements distinguish a conditional move from a preset hiking cycle

Under the November 2026 Monetary Policy Report central projection, UK CPI inflation is expected to climb to around 4.5% in Q1 2027—1.25 percentage points above the July forecast—and peak near 5% (a 4.9% quarterly average) in Q2 2027, with direct energy effects contributing roughly 1.4 percentage points in Q1 2027 and indirect effects adding about 0.5 percentage points. Fiscal measures in Autumn Budget 2026—extending the household electricity VAT cut through Q2 2027 and postponing the fuel duty increase until July 2027—are estimated to lower Q2 2027 CPI by 0.25 percentage points. Because futures curves are conditional, the Bank sets out three distinct paths: the central projection with downward-sloping wholesale energy curves and firmer second-round wage and price pass-through; an adverse inflation scenario in which energy prices rise again and stay elevated; and a weaker demand scenario in which high energy costs erode household buffers and corporate margins, muting second-round effects.¹²

Within the eight-member majority backing the 25-basis-point increase, members differed sharply on future rate guidance. Alan Taylor described the decision as a risk-management "one-for-now" insurance hike rather than the start of an unconditional hiking cycle, whereas Huw Pill, Megan Greene, and Clare Lombardelli argued that further tightening is likely to be needed in the near term absent clear evidence of easing inflation pressures. Methodological changes also require caution when comparing price series: since March 2026, the Office for National Statistics has incorporated supermarket checkout scanner data covering roughly 50% of the UK grocery market into food CPI compilation, and third-party LSEG market series referenced in Bank charts remain subject to separate data licensing restrictions.¹²³

Source notes

1. 2026-11-05 · Monetary Policy Summary and minutes of the Monetary Policy Committee meeting ending on 4 November 2026 · Bank of England. ↩ ↩² ↩³ ↩⁴

2. 2026-11-05 · Monetary Policy Report - November 2026 · Bank of England. ↩ ↩² ↩³ ↩⁴

3. 2026-10-21 · Consumer price inflation, UK: September 2026 · Office for National Statistics. ↩ ↩²