Bank of England expected to raise rates to 4% as UK inflation accelerates
The Bank of England is widely expected to raise its benchmark rate by a quarter-point to 4% on Thursday, its first increase since August 2023. UK inflation reached 3.5% in September, and the Office for Budget Responsibility forecasts it will approach 4% early next year; the Bank will also publish updated economic and inflation forecasts.
Bottom line — Markets have priced in further increases, but Oxford Economics’ Alexander Harvey says Thursday’s move need not begin a prolonged hiking cycle.
Go deeper 6
-
The OBR forecasts food inflation will rise from 1.8% in the third quarter this year to 5.5% in the same period next year.
-
The OBR expects household consumption per person to return to its pre-pandemic peak only in early 2029.
-
Bank of England data show the average five-year fixed mortgage rate for borrowers with a 75% loan-to-value ratio reached 4.98% at the end of September.
-
The Financial Times reports that mortgage approvals fell in September to their lowest level since late 2023.
-
FXStreet reports sterling was trading near $1.34 on Monday as investors awaited the Bank of England decision.
-
OCBC says the UK Budget preserved £15bn of headroom against the stability rule, while markets have already priced in substantial further rate rises.