Bank of England raises rates to 4% as Iran war pushes up inflation
The Bank of England raised its base rate from 3.75% to 4% on Thursday, its first increase in more than three years. Governor Andrew Bailey said another rise is likely unless the conflict in the Middle East is resolved.
The Bank of England raised interest rates on Thursday for the first time since August 2023. The base rate rose by a quarter point, from 3.75% to 4%. The Bank said the move aims to curb inflation driven mainly by the Iran war's impact on oil prices, the BBC reported. According to the Guardian, the conflict has kept oil prices above $100 a barrel for months. Hopes of a deal to reopen the Strait of Hormuz have faded. The Bank now expects UK inflation to peak at 4.9% in mid-2027, up from 3.2% in its July forecast. Inflation reached 3.5% in September. The BBC reported that inflation could hit 6.2% in 2027 in an "adverse scenario" in which the war escalates. The Bank does not expect inflation to return to its 2% target until 2028. Eight of the nine members of the monetary policy committee voted for the quarter-point rise. The ninth, Catherine Mann, wanted a half-point increase to 4.25%. The minutes reveal splits over what comes next. Alan Taylor called the move a "one-for-now" insurance hike. Megan Greene said more hikes might follow, depending on wages, prices…
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