Bank of England raises rate to 4% as energy costs lift inflation outlook

What happened

The Bank of England’s Monetary Policy Committee (MPC) raised Bank Rate by 0.25 percentage points to 4% at its meeting ending on 4 November 2026, according to minutes published on 5 November.

Eight members supported the increase, while one preferred a larger rise of 0.5 percentage points, to 4.25%.

The Bank said UK consumer price inflation rose to 3.5% in September and was expected to reach around 5% by the middle of next year. It attributed the worsening outlook to further increases in already elevated global energy prices, with the Middle East conflict now in its ninth month.

Why it matters

The decision signals tighter monetary policy as the MPC seeks to prevent energy-driven inflation from becoming persistent. For financial firms and their customers, the Bank’s assessment centres on mounting cost pressures: higher energy prices are continuing to feed into household and business bills.

The committee said there was still limited evidence of these pressures spreading to other prices and wages. Nevertheless, it judged the inflationary pressure in the pipeline sufficient to warrant a rate rise. Stronger-than-expected activity data in recent months also supported the decision.

According to the minutes, some businesses had been shielded from higher gas and electricity costs by hedging or longer-term fixed-price contracts. Others were absorbing costs through lower profit margins. The MPC judged that these buffers would mostly be temporary if the energy shock persisted.

Context / What to watch

The Bank expects inflation subsequently to fall as the impact of energy price increases on annual inflation fades and restrictive monetary policy bears down on price pressures.

The MPC stressed that rates were not on a predetermined path. It will monitor underlying pay, firms’ pricing behaviour and spare capacity to assess whether energy costs are spreading through the economy, adjusting policy as necessary to return inflation to its 2% medium-term target.

The next Bank Rate decision is due on 17 December 2026.