The Bank of England raised interest rates by a quarter point to 4 percent on Thursday, marking the first increase since 2023. The Monetary Policy Committee voted 8-1 in favor, with Catherine Mann dissenting for a half-point hike. Governor Andrew Bailey signaled at least one further increase likely in December, warning inflation could hit 5 percent next year and may not return to the 2 percent target until late 2028.
New forecasts show inflation rising to 4.5 percent in Q1 2024. The decision follows an energy shock linked to geopolitical tensions in the Middle East. Despite recent oil price declines, the Bank cites persistent inflationary pressures and rising household energy bills.
Traders now see a 50 percent chance of a December hike, up from 20 percent. The yield on two-year gilts rose to 4.77 percent, and the pound steadied at $1.347 against the dollar.
Source: Financial Times Markets · Summarized by HeadlinesBriefing