BoE expected to hike interest rate to 4.00%

The Bank of England (BoE) is expected to raise its interest rate to 4.00% during its meeting on Thursday, which is the seventh rate-setting session of 2026. This move would mark the highest level since November 2025. The Monetary Policy Committee (MPC) is anticipated to increase the policy rate by a quarter point, following a decision that has been anticipated by market analysts.

The outcome of the meeting will be accompanied by the release of the minutes, which will provide insights into the internal deliberations that led to the final decision. In September, the BoE kept interest rates at 3.75% after a 6-3 vote split from the MPC, reflecting the ongoing uncertainty surrounding the crisis in the Middle East.

Bank of England Governor Andrew Bailey, during his recent remarks, highlighted that high UK inflation is "enormously frustrating," while also cautioning that it is too early to assess the impact of any second-round effects. So far, the effects of high inflation have appeared relatively subdued, as businesses focus on cost-cutting rather than aggressive price increases.

Bailey also noted that the UK economy has proved more resilient than expected, but growth remains weaker than the Bank would like. The Middle East developments have been identified as the primary driver behind gilt yields, adding additional uncertainty to the policy outlook. In the eyes of market participants, there is a strong inclination toward a rate hike on Thursday at 12:00 GMT.

The split vote among MPC members could potentially influence the market reaction to the Pound Sterling (GBP/USD). In the days leading up to the meeting, GBP/USD has been on an upward trajectory for four consecutive weeks, possibly further eroding the downward trend that began in late August. Currently, GBP/USD is trading near the September high of 1.3567, and the next resistance level to watch is the August ceiling at 1.3675.

On the downside, there are no significant support levels until the 2026 floor at 1.3137, followed by the November 2025 low at 1.3010. Technical indicators, such as the Relative Strength Index (RSI) and the Average Directional Index (ADX), suggest that momentum remains favorable for further gains.