Bank of England raises rates for first time since 2023, says more may come
The BoE raised its key rate to 4% from 3.75%, warning that further hikes may be needed if the US-Iran conflict keeps energy prices elevated.
The Bank of England, for the first time in three years, has raised interest rates in response to the inflation surge on the island. The Bank of England (BoE) increased the benchmark rate by a quarter point to 4.00 percent on Thursday. Economists surveyed by Reuters had anticipated the move. The surge in prices driven by high energy costs had last risen to 3.5 percent, putting the Bank of England in a dilemma as it targets only a 2.0 percent inflation rate.
Britain is more affected by the aftermath of the energy price shock sparked by the Iran war than many other Western countries due to its dependence on gas imports. BoE chief Andrew Bailey had explicitly warned that a prolonged conflict in the Middle East could necessitate tighter monetary policy. Markets anticipate that the BoE will make several more rate hikes next year.
The BoE joins a list of central banks around the world countering inflation fueled by the oil price shock. In September, the US Federal Reserve raised interest rates for the first time this year and could follow suit in December according to experts. The European Central Bank has already made two upward steps by 2026 and could let another one happen in December.
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