Bank of England likely to raise rates in November as energy price surge fuels inflation risks
Analysts expect the Bank of England to vote for a rate increase at its 5 November meeting, with a possible second hike in February, driven by rising energy costs and inflation pressures.
The Bank of England is expected to raise its policy rate at the meeting on 5 November, with analysts forecasting a 7-2 vote in favour of the move and a further increase in February. The decision comes as a sharp rise in natural-gas prices is set to push headline consumer-price inflation above 4 % early next year, a level the Bank has identified as a threshold for stronger second-round effects.
While recent data show core services inflation and energy-intensive price measures remaining stable, the regulated cap on household energy bills is projected to rise by about 25 % in January, adding pressure to the inflation outlook. Private-sector wage growth is running at 3.4 % year-on-year, which analysts say does not yet indicate accelerating wage pressures.
The Committee’s composition suggests that two members, Swati Dhingra and Alan Taylor, are likely to oppose a hike, but the remaining seven members are expected to support it. Governor Andrew Bailey has not publicly expressed strong enthusiasm for a rate rise, and potential dissent could also come from members such as Sarah Breeden, who has noted that many businesses are absorbing the energy shock without passing costs on to consumers.
Analysts anticipate the Bank will adopt a cautious forward-guidance stance, indicating that any further tightening will depend on how higher energy prices affect wage and price-setting dynamics. A possible statement could read: “The Committee will carefully assess the extent to which higher energy prices are propagating into wage and price-setting. The timing and pace of any further increases will depend on the evolution of the inflation outlook.”
Market participants are watching for any language that would signal a more hawkish outlook, such as an explicit expectation of additional tightening in the coming months, as well as the individual member paragraphs in the minutes for signs of dissent or support for the market’s pricing of multiple future hikes.