Bank of England Raises Key Interest Rate to 4% for First Time in More Than Three Years

The Bank of England is following the Swedish Central Bank's lead, raising its key interest rate by a notch. The increase, the first in more than three years, is due to rising energy costs.

The central bank writes that the increase should not be seen as “the first in a long line of increases, but if the conflict in the Middle East is not resolved, it is unlikely to be the last”.

The Bank of England is also raising its inflation forecasts. Inflation, measured by the CPI, is expected to reach 3.8 percent in the fourth quarter of 2026. This compares with 3.2 percent in the forecast presented in July.

Inflation is also expected to rise to 4.0 percent in 2027 before falling back in 2028.