The Bank of England is widely expected to raise interest rates by 25 basis points to 4.00% at Thursday’s Monetary Policy Committee meeting, which would be its first increase since August 2023. Market pricing implies a probability of more than 96%, and analysts anticipate a 7–2 vote in favour of the move, with external members Swati Dhingra and Alan Taylor expected to back leaving rates unchanged.
The anticipated hike follows a renewed pickup in UK inflation, with CPI rising to 3.5% in September from 3.1% in August. Services inflation and core inflation also remain elevated, underscoring concerns over persistent domestic price pressures.
However, it is still unclear whether this will prove to be a one-off, precautionary increase or the start of a more extended tightening cycle. Markets have at times priced in additional hikes towards 4.75% or higher next year, but Governor Andrew Bailey’s remarks and the signals from the updated Monetary Policy Report will be crucial in clarifying the Bank’s likely policy trajectory.
