The Bank of England (BoE) announced on Thursday that it raised the policy rate by 25 basis points (bps) to 4% following the November meeting. This decision came in line with the market expectation. Eight members of the Monetary Policy Committee (MPC) voted in favor of the decision while policymaker Catherine Mann voted for a 50 bps increase.
BoE Monetary Policy Report key highlights
"CPI expected to peak at around 5% in Q2 2027 in central scenario."
"Now enough inflationary pressure in pipeline caused by energy prices to raise rates."
"Doesn't seem likely to be last increase unless Middle East conflict resolved."
"Hike shouldn't be seen as first in inevitable long sequence of increases."
"BoE bumps up GDP growth forecast: sees 1.6% in 2026, 1.3% in 2027, 1.2% in 2028 (July: 1.1% in 2026, 1.1% in 2027, 1.7% in 2028)."
"Central forecast shows CPI to return to 2% target in Q3 2028 (July: fall below target in Q1 2028)."
"BoE sees headline Q3 GDP growth of +0.7% QQ (Sept: +0.4%)."
"Central forecast shows CPI at 4.4% in Q1 2027, 3.1% in Q1 2028, 1.9% in Q1 2029 (July: 3.2% in Q1 2027, 1.7% in Q1 2028, 1.9% in Q1 2029)."
"Government budget likely to cut inflation by 0.25 percentage points by Q2 2027, then raise by same amount a year later as effect unwinds."
"Budget likely to boost demand by 0.1% in 2026-27, drag by a little over 0.1% by 2029-30."
"Still limited evidence of second-round effects from higher energy prices."
"Stronger than expected activity data added to case for tighter monetary policy."
"GDP growth likely to fall back in coming quarters."
"BoE's Lombardelli, Pill see case for further "near term" rate hike."
"Some of upward market curve explained by risk premia not expected rates; current restrictiveness broadly appropriate."
"Adverse scenario shows CPI peaking at 6.2% in Q3 2027."
"Market rates imply bank rate at 3.9% in Q4 2026, 4.9% in Q4 2027, 4.9% in Q4 2028, 4.7% in Q4 2029."
"BoE sees unemployment rate of 4.8% in 2026, 4.9% in 2027, 5.1% in 2028 (July: 5.0% in 2026, 5.3% in 2027, 5.2% in 2028)."
"BoE sees private-sector regular wage growth of 3.2% YY in Q4 2026, 3.5% in Q4 2027, 3.4% in Q4 2028 (July: 3.0% in Q4 2026, 3.1% in Q4 2027, 3.1% in Q4 2028)."
"BoE sees real post-tax labour income growth of -0.1% in 2026, -0.6% in 2027, 1.0% in 2028 (July: 0.1% in 2026, 0.5% in 2027, 1.1% in 2028)."
Market reaction to BoE Moentary Policy Report
GBP/USD recovered slightly from session lows with the immediate reaction to the BoE's Monetary Policy Report and was last seen trading virtually uchanged on the day at 1.3470.
Pound Sterling Price This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Japanese Yen.
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
This section below was published as a preview of the Bank of England's (BoE) interest rate decision at 08:00 GMT.
- The Bank of England is expected to raise its policy rate to 4.00%.
- UK inflation figures remain well above the BoE’s goal.
- GBP/USD remains close to the 1.3500 mark, or two-month highs.
The Bank of England (BoE) is set to reveal its latest monetary policy decision on Thursday, coinciding with its seventh rate-setting meeting of 2026.
Market analysts expect the ‘Old Lady’ to increase its policy rate by a quarter percentage point to 4.00%, the highest level since November 2025.
As usual, the Monetary Policy Committee’s (MPC) decision will be followed by the publication of the meeting Minutes, which will detail the internal discussions that shaped the outcome.
The central bank maintained interest rates at 3.75% in September amid a split vote from the MPC (6-3), indicating an impasse to assess the potential effects on the UK economy of the still ongoing crisis in the Middle East.
Attention remains broadly on inflation and geopolitics
In his latest comments, Bank of England Governor Andrew Bailey said above-target UK inflation remained “enormously frustrating" but cautioned that it was still too early to assess the strength of any second-round effects. So far, those effects appear subdued, with businesses focusing on cutting costs rather than raising prices more aggressively.
Bailey said the UK economy had proved more resilient than expected, although activity remained weaker than the Bank would like. He also noted that developments in the Middle East were the main factor driving gilt yields, adding another layer of uncertainty to the policy outlook.
Overall, Bailey’s message was cautious rather than decisively hawkish. The BoE still needed more evidence on whether the inflation shock is becoming embedded before it can form a firm view on the next policy move.
How will the BoE interest rate decision impact GBP/USD?
Market participants appear broadly inclined toward a rate hike on Thursday at 12:00 GMT.
Beyond the rate decision per se, attention will also focus on the vote split among MPC members, which might be a market mover for the British Pound if it indicates an unusual outcome.
In the run-up to the meeting, GBP/USD advances for the fourth week in a row, looking to further fade the sharp downward trend initiated in late August.
"Cable keeps the multi-week recovery well in place, managing to clear its key 200-day SMA around 1.3420, therefore allowing for the rebound to continue," said Pablo Piovano, Senior Analyst at FXStreet. Next on the upside comes the September high at 1.3567 (September 9), followed by the August ceiling at 1.3675 (August 21).
On the downside, there are no support levels of note until the 2026 floor at 1.3137 (October 14), prior to the November 2025 valley at 1.3010 (November 4), Piovano adds.
“Momentum indicators seem to favour extra gains, as the Relative Strength Index (RSI) climbs past the 65 level, while the Average Directional Index (ADX) around 22 is indicative of a fairly firm trend,” he concludes.
Economic Indicator
BoE Interest Rate Decision
The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.
Read more.BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
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