MediumIV Macro Policy & Sovereign Debt5 November 2026, Thursday · 15:00 TRT (UTC+3)
Bank of England raises rates to 4% on the energy shock
The BoE raised Bank Rate by 25 basis points on 5 November, from 3.75% to 4%, on an 8–1 vote. The committee expects headline inflation to rise to about 5% in the second quarter of 2027.
On the Monetary Policy Committee, Catherine Mann voted for a 50-basis-point move to 4.25%, while the other 8 members backed 25 basis points. The BoE's projections assume Brent futures averaging 108 dollars and UK gas futures 216 pence per therm over the 15 working days to 27 October. Those levels are 38% and 81% above the July report respectively.
September CPI stood at 3.5%, with roughly 1 point coming directly from energy. The committee expects inflation to rise to about 4.5% in the first quarter of 2027; according to Trading Economics, the adverse scenario puts the peak at 6.2%. Alan Taylor described the move not as the start of a cycle but as an insurance hike against risk. According to Channel 4, Bailey said it would not be the last increase if the conflict is not resolved.
The market had priced the decision in advance. The 10-year gilt closed at 5.15% on 5 November, about 1 basis point lower on the day, while the 30-year rose to 5.63%. According to Trading Economics, money markets fully price 3 more hikes by November 2027. According to the BoE, 2-year fixed mortgage rates have risen by about 50 basis points since September.
Talay assessment
Bottom line
The hike is not the declaration of a cycle but an attempt to stop gas-driven inflation seeping into expectations. The 8–1 vote shows the debate has shifted to the size of moves. The most likely path is for the committee to hold on 17 December and leave February to energy prices; if Brent rises above 108 dollars, a second move comes forward.
Likely effects
- Household creditNegative1–6 months
2-year fixed mortgage rates, up about 50 basis points since September, spread through refinancings and squeeze winter consumption.
- Gilt curveNegativeWeeks
The rise in the 30-year yield to 5.63% shows the back end pricing 2027 inflation risk despite the hike; the curve stays steep.
- TürkiyeNegative1–6 months
Weaker UK household demand reduces order visibility for Turkish textile and white-goods exporters selling to Britain.
Possibilities, ranked
- 1Hold in December, February open55%
Brent stays in a 95–108-dollar band, the committee holds on 17 December and leaves February to the data.
Watch: The BoE decision on 17 December and November CPI
- 2Second hike in December30%
Attacks in the Gulf continue, Brent rises above 108 dollars and the committee raises Bank Rate to 4.25% in December.
Watch: January Brent relative to 108 dollars
- 3A single move15%
A deal that reopens Hormuz lowers energy prices, and the committee leaves the hike as a one-off.
Watch: UK gas futures returning to their July level
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Bank Rate▲ 4.00%
- 10-year gilt▼ 5.15%
- 30-year gilt▲ 5.63%