LONDON, Nov 5 — The Bank of England raised its benchmark Bank Rate by 0.25 percentage points to 4% on Thursday, the first increase in more than three years, as its Monetary Policy Committee (MPC) judged that inflationary pressure building from higher global energy prices now warranted tighter policy. The decision, announced at 12:00 GMT at the end of the MPC meeting that concluded on November 4, was in line with the consensus forecast of 4.00% recorded on the ForexFactory calendar, against a previous rate of 3.75%.

Source: Bank of England Monetary Policy Summary, via ActionForex

Eight MPC members — Andrew Bailey, Sarah Breeden, Swati Dhingra, Megan Greene, Clare Lombardelli, Huw Pill, Dave Ramsden and Alan Taylor — voted for the quarter-point increase. Catherine L Mann voted against, preferring a 0.5 percentage point increase to 4.25%, arguing from a risk-management and credibility perspective that an activist approach was needed to prevent persistent inflation becoming embedded, the minutes record.

Source: Bank of England MPC minutes, via ActionForex

Bank Rate is the interest rate the Bank of England charges other banks and lenders when they borrow from it, so it feeds through to what households and businesses pay on mortgages and loans and what savers earn. Thursday's move is the first rise since August 2023 and follows six consecutive meetings at which the rate was held; it had stood at 3.75% since a cut in December 2025, MoneySavingExpert reported.

Source: MoneySavingExpert

The decision delivers the move markets had been pricing in all week, which Awaaz Punjab previewed ahead of the announcement. Read the earlier preview: BoE poised to raise rates to 4%

Why the Bank acted: energy prices and a 5% inflation path

The Bank said the Middle East conflict is now in its ninth month and global energy prices have continued to rise from an already elevated level. Over the 15 UK working days ending October 27, the front-month Brent crude futures contract averaged $108 per barrel and the UK front-month natural gas contract averaged 216 pence per therm — 38% and 81% higher respectively than at the time of the July Monetary Policy Report. Direct energy effects contributed around 1 percentage point of September's 3.5% CPI reading, most of it from fuels.

Source: Bank of England MPC minutes, via ActionForex

Bank staff now project headline CPI inflation to reach around 4½% in the first quarter of 2027 and around 5% in the second quarter, before falling back as the impact of energy prices on 12-month rates fades and still-restrictive policy bears down. The Committee said that while there remains limited evidence of knock-on effects on other prices and wages, 'the degree of inflationary pressure in the pipeline is now sufficient to warrant an increase in Bank Rate,' and noted that activity data had generally been stronger than expected. Measures in the October 28 Budget were expected to lower CPI inflation by ¼ percentage points by the second quarter of 2027.

Source: Bank of England Monetary Policy Summary, via ActionForex

What it means for borrowers and markets

Benchmark two-year mortgage rates had already risen by nearly 50 basis points since the beginning of September, the minutes noted, and new mortgage approvals for households had been falling even as business lending growth remained strong. Because the hike matched the forecast exactly, it was not a surprise shock: FXStreet described the decision as coming 'in line with the market expectation.' Typically, a rate rise of this kind means traders expect borrowing costs to stay higher for longer and sterling to be supported, while tracker and variable-rate mortgage holders feel the increase first.

Source: FXStreet

The Bank stressed that monetary policy is not on a pre-set path. It will keep assessing at each meeting how likely high energy prices are to feed through to other prices, watching pay, pricing behaviour and slack, and will adjust Bank Rate as necessary to return CPI inflation to the 2% target in the medium term. Its Market Participants Survey median expected path had already risen to 4% in November and 4.25% in February.

Source: Bank of England Monetary Policy Summary, via ActionForex