Bank of England raises rate to 4% and allows for inflation to reach 5% in 2027

The regulator's decision

On Thursday, the Bank of England raised the base interest rate by 25 basis points to 4%. The Monetary Policy Committee voted 8–1 in favor of the increase at a meeting that ended on Wednesday; Catherine Mann argued for a larger hike of 50 basis points, to 4.25%. Anadolu reported this.

Why the regulator tightened policy

The regulator explained the decision by rising global energy prices amid the conflict in the Middle East, which, according to the bank, has already lasted nine months and raises the risk of sustained inflation. An additional argument was stronger-than-expected economic activity. At the same time, as noted in the statement, there was limited evidence that rising energy costs had already noticeably passed through to other prices and wages — the regulator acted on the assumption of mounting inflationary pressure.

Inflation and energy price forecast

Annual inflation in the UK reached 3.5% in September — the highest since October 2025. According to the bank's forecast, it will rise to about 4.5% in the first quarter of 2027 and to around 5% in the second quarter, before starting to decline as the energy base effects fade and restrictive policy takes hold. Brent oil futures averaged $108 per barrel over the 15 British working days to October 27, while UK natural gas futures stood at 216 pence per therm — 38% and 81% higher, respectively, than the levels at the time of the July Monetary Policy Report.

Buffers and next steps

Some companies, in the regulator's assessment, absorbed rising costs by cutting margins or were protected by contracts with fixed energy prices, but the bank warned that such buffers are likely to prove temporary if the energy shock persists. The regulator pledged to adjust the rate as necessary to return inflation to the 2% target, emphasizing that 'monetary policy does not follow a pre-set path.'