MediumIV Macro Policy & Sovereign Debt3 November 2026, Tuesday
Markets fully price a BoE hike, shifting debate to February
The Bank of England is preparing on 5 November for its first rate rise since 2023. According to Trading Economics, money markets were almost fully pricing a November hike as of 30 October.
Bank Rate stands at 3.75% and inflation rose to 3.5% in September. After November, markets are also pricing hikes in February and July, and put roughly 50% odds on a further move by December 2027. The 10-year gilt yield rose 5 basis points to 5.24% on 3 November; it is down about 15 basis points over the past month but up 82 basis points over the year.
In a preview published on 30 October, Danske Bank expects a 25 basis point rise to 4.0%, with a solid majority of the committee voting for it. The bank regards the roughly 100 basis points of tightening priced for the next year as probably excessive and puts the neutral rate at around 3%. Trading Economics expects the committee to push back against bets on hikes in 2027.
Danske sees the autumn 2026 Budget as cautious and in line with expectations, adding only modestly to near-term borrowing. In its view, the 3.5% inflation rate is driven by energy prices after the Middle East war, while domestic wage pressure is limited. That distinction will shape the guidance the committee gives on February at its 5 November meeting.
Talay assessment
Bottom line
With the November hike priced in, the surprise on decision day lies not in the rate but in whether the committee endorses the moves priced for February and July. Danske's view that 100 basis points of pricing is excessive, and that neutral sits near 3%, suggests the committee could deliver a cautious hike and pull the market back. The most likely path is a 25 basis point rise with guidance that limits further steps.
Likely effects
- Gilt yieldsUncertainWeeks
If the committee resists further moves, front-end gilt yields fall; the 10-year at 5.24% stays sensitive to that signal and to energy prices.
- Households and mortgagesNegative1–6 months
A rise from 3.75% to 4.0% lifts the cost of mortgages being refixed and, with inflation at 3.5% in September, squeezes real incomes.
- Public financesNegative1–6 months
An 82 basis point annual rise in gilt yields is swelling the debt interest bill, and a hike adds to that burden at the front end too.
Possibilities, ranked
- 1Cautious hike60%
The BoE lifts Bank Rate to 4.0% but does not commit to February, partly unwinding market pricing.
Watch: The 5 November vote split and the wording of guidance on February
- 2Hawkish hike25%
The committee treats the energy shock as persistent and leaves the door open to further rises.
Watch: The 10-year gilt yield moving above 5.24%
- 3Surprise hold15%
The committee stresses limited wage pressure and keeps Bank Rate at 3.75%.
Watch: The decision statement describing the energy effect as temporary
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- BoE Bank Rate▲ 3.75%
- 10-year gilt▲ 5.24%
- September CPI▲ 3.5%