Economists polled by Reuters expect the Bank of England to raise Bank Rate to 4.0 percent from 3.75 percent on Thursday, the first increase since August 2023, when inflation was still more than triple the 2 percent target. The poll points to a 7 to 2 vote in favour, with external members Alan Taylor and Swati Dhingra seen as most likely to vote to hold. Market pricing is firmer still, with traders putting the chance of the move at roughly 96 percent in reporting this week.
The pressure is energy. The Bank warned in September that inflation would rise above 4 percent early next year, and September consumer price inflation came in at 3.5 percent, above the 3.0 percent the Bank had forecast in July. Governor Andrew Bailey has said the Bank cannot wait for conclusive proof of second round effects, where higher inflation feeds into wage and price setting, or it will act too late. The committee held in September by 6 votes to 3, with the three dissenters already backing an increase.
The argument on Thursday is less about the first hike than about the path. Markets price three to four further quarter point increases in 2027, which would take Bank Rate to between 4.75 and 5.0 percent, and even hawkish members may balk at endorsing that path. Oxford Economics’ Alexander Harvey told Reuters the minutes or Bailey could signal that Bank Rate is unlikely to reach the level priced in by financial markets, and economists polled last month were split on whether further hikes follow November’s at all, a divide between traders and economists that Bloomberg also flagged on Tuesday.