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Bank of England raises interest rates to 4%, the first increase in more than three years

BBC • November 5, 2026 • world

Key Points:

Bank of England Governor Andrew Bailey warned that the ongoing Iran conflict is expected to push UK inflation to around 5% in 2027, prompting the Bank to raise interest rates to 4% to curb rising prices, particularly due to higher energy costs.
The Bank's rate-setting committee unanimously supported a 0.25 percentage-point increase, with some members indicating potential for further hikes depending on inflation dynamics and the Middle East conflict resolution.
Chancellor John Healey acknowledged the economic strain caused by the Iran war on UK families and businesses, highlighting recent Budget measures such as energy payments and tax cuts aimed at providing relief.
The pound has strengthened to its highest level since the 2016 Brexit referendum, which may help reduce inflation by increasing purchasing power on imports and overseas spending.
Despite recent rate cuts, the Bank of England has resisted raising rates until now due to uncertainty about the conflict's duration and inflation spreading into wages, but the recent escalation in fuel prices has shifted policy towards tightening monetary conditions.

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