Bank of England lifts benchmark rate to 4 percent

LONDON, England, Nov. 5, 2026. The Bank of England raised its main interest rate to 4 percent on Thursday, marking the first increase in more than three years. The move lifts the key rate from 3.75 percent in an effort to manage inflation that has risen due to the ongoing war in Iran.

Inflation in the United Kingdom reached an 11-month high of 3.5 percent in September. This figure stands well above the central bank's target of 2 percent. The spike in prices was widely attributed to a sharp increase in fuel costs. These higher energy prices resulted from bottlenecks in the Strait of Hormuz, which squeezed global supplies of oil and gas following the conflict.

The pressure on the nine policymakers of the Monetary Policy Committee grew steadily over recent months. The recent surge in prices cemented market expectations for a rate hike this month. Analysts also noted the possibility of additional increases in 2027 if inflation continues to climb.

Ellie Henderson, an economist at Investec, commented on the decision. She stated, "We imagine that many committee members’ patience with the recent rise in inflation has worn thin." Henderson added that the longer energy prices remain elevated, the greater the risk that a temporary price shock becomes more permanent.

The rate hike coincides with the release of the bank’s quarterly economic projections for inflation and growth. Higher interest rates typically cool the economy by making borrowing more expensive, which reduces spending and inflation, but also slows growth. The current outlook remains uncertain because the economic forecast depends heavily on the trajectory of the Iran war.

Recent political developments in the United States have introduced new variables. Heavy losses by the Republican Party in the U.S. midterm elections led to a sharp fall in energy prices. If these lower oil and gas prices are sustained, the upcoming peak in inflation may be lower. This could temper expectations for further rate hikes by the Bank of England and other central banks.

Other major institutions, including the U.S. Federal Reserve and the European Central Bank, have recently raised rates in response to similar inflation pressures. Interest rates in the U.K. had been trending downward from a 15-year high of 5.25 percent until the U.S. and Israel attacked Iran on Feb. 28.