The Bank of England raised interest rates on Thursday for the first time in more than three years, lifting its key rate by a quarter point to 4 percent as policymakers acted against inflation driven by the war in the Middle East. Governor Andrew Bailey said the conflict in Iran, now in its ninth month, has been the critical driver of higher prices, with inflation expected to climb to about 5 percent next year—far above the 2 percent target.
British inflation ran at 3.5 percent in the year through September, the highest in nearly a year, and is not expected to return to target until the second half of 2028. The rate increase was nearly unanimous, though one committee member argued for a larger half-point hike. Bailey warned that unless the conflict is resolved, further increases may follow.
The decision aligns the Bank of England with the Federal Reserve, European Central Bank and Bank of Japan, which have also raised rates this year. Officials cited higher household energy bills and fuel prices as major factors, noting that inflationary pressures from eight months of war remain "in the pipeline" even if the conflict ends soon.
Source: New York Times Business · Summarized by HeadlinesBriefing