Boe Preview: Bank Set To Lift Rates To 4% As Inflation Bites

(MENAFN- DailyFX (IG)) Bank of England preview: first rate hike in three years looks all but certain

The Bank of England looks set to raise rates to 4% on Thursday, with inflation running ahead of forecasts and firms lifting price expectations.

Source: Bloomberg Interest rate Monetary policy Inflation

Written by

Chris Beauchamp

Chief Market Analyst

Publication date 2026-11-02T14:50:14+0000 What markets expect from the Bank of England on Thursday

After more than three years of holding or cutting, the Bank of England (BoE) looks set to remind markets that rates can also go up, with investors and most analysts expecting the Monetary Policy Committee (MPC) to lift Bank Rate by 25bps to 4% from 3.75% when it announces its decision at 12pm this Thursday. Governor Andrew Bailey has said the likelihood of a hike grows the longer energy prices stay elevated, while MPC member Megan Greene has argued openly for tightening, warning that the risk of the energy shock feeding into broader inflation is greater than expected. The minutes and the Monetary Policy Report (MPR) arrive at the same time, which should give markets plenty to digest over lunch.

Inflation has run ahead of the BoE's forecasts

The Bank's July projections look somewhat optimistic in hindsight. UK CPI rose to 3.5% in September from 3.1% in August, its highest in 11 months, against a consensus forecast of 3.4% and a BoE projection of 3%, with higher petrol and diesel costs linked to the Iran conflict doing most of the damage. The more awkward detail for policymakers sits beneath the headline – services inflation climbed to 3.7% from 3.4%, core inflation rose to 2.8% from 2.6% and factory gate prices increased 4.6% YoY, the biggest rise since April 2023, while manufacturers' input costs jumped 8.3%, suggesting there is more pressure still working its way through the pipeline.

Firms are lifting their own price expectations

The BoE's own Decision Maker Panel adds weight to the hawkish case. Year-ahead CPI expectations rose to 3.3% in the three months to October from 3.1%, and 68% of firms expect to raise prices over the next 12 months, up 11 percentage points from September. Realised wage growth stands at 3.9%, with firms expecting only a modest easing to 3.4% over the coming year, which leaves the MPC contemplating the second-round effects on wages and services that central bankers spend most of their careers trying to avoid.

Vote split and guidance will shape expectations for December

With a hike largely priced in, attention will likely shift to the vote breakdown and to whether the MPC presents this as a one-off move or the first step in a tightening cycle. The revised inflation and growth forecasts in the MPR will be scrutinised for how persistent the Bank believes the energy shock will prove, with oil having traded above $100 a barrel and 10-year gilt yields recently around 5.31%, as well as for any acknowledgement of the growth cost of tighter policy. The global backdrop is mixed, the ECB, the Fed and the RBNZ having all held rates in recent days, which could leave the BoE looking distinctly hawkish by comparison. Chief economist Huw Pill briefs businesses on Friday 6 November, an early opportunity to clarify whatever the minutes leave ambiguous.

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