Bank of England likely to raise interest rates again next month

Summarised from 2 outlets · 3 reports · Updated 14 Nov, 17:27 · Archive

The Bank of England's chief economist says further interest rate increases are probable in December and early 2027 to combat rising inflation.

The Bank of England's chief economist Huw Pill has signalled that interest rates will probably need to rise again next month and once more in early 2027. This follows the increase from 3.75 per cent to 4 per cent earlier this month, which Pill described as a 'significant step' towards better monetary policy. However, he told the Financial Times that 'we have further to go'.

Pill indicated he would vote for another quarter-point increase at the Bank's next meeting on 17 December. He said market expectations suggesting the bank rate could approach 5 per cent next year were 'not outrageous' and that 'we will see evidence that motivates further rises'.

Inflation is currently running at 3.5 per cent but is forecast to rise to 5 per cent in spring 2026. The increase is driven by high oil and gas prices resulting from the Iran war. Pill expects that higher energy costs will push up corporate prices more widely and cause both public and private sector workers to demand substantial pay rises, which would keep inflation elevated for longer.

The raise in interest rates will affect 2.3 million homeowners who must refinance their mortgages next year. If rates rise to 4.25 per cent, mortgage deals will increase and business loans will become more expensive. This comes as the UK economy has grown strongly, with third-quarter growth of 0.7 per cent giving an annual rate surpassed among the G7 only by the United States.

Pill said the central bank would 'do what is necessary to get inflation back to 2 per cent through time'. He considered an end to the US-Israeli conflict with Iran and a fall in energy prices to be of 'very low probability', signalling his readiness to support further increases.

How it is being reported

• Further interest rate rises needed to tackle inflation, Bank of England’s chief economist saysHuw Pill suggested he would vote for another quarter-point increase in DecemberThe Independent · 14 Nov, 17:05
• A rapid interest rate rise seems inevitable – and households are expected to pick up the tabRaising borrowing costs too far risks laying waste to whatever growth there is in the economy A head of steam is building up behind the Bank of England raising interest rates again. With the latest forecasts by the central bank showing inflation rising to 5% next spring, another increase in the cost of borrowing seems inevitable, and may come as soon as next month. A growing number of analysts predict the Bank’s policymakers will don Scrooge masks when they meet on 17 December to deliver a message of austerity and sacrifice. Continue reading...Guardian World · 14 Nov, 16:00
• Interest rate rises likely in coming months, Bank of England economist says‘We have further to go,’ says Huw Pill after increase to 4% last month as Bank seeks to tackle rising inflation The Bank of England will probably need to raise interest rates next month and again in early 2027 to combat rising inflation, its chief economist has said. Signalling a sharp rise in mortgage payments for an estimated 2.3 million homeowners who will have to refinance their loans next year, Huw Pill said that while the decision to nudge interest rates from 3.75% to 4% earlier this month was a “significant step” towards getting monetary policy into a better place, “we have further to…The Guardian · 14 Nov, 12:05

In this story: Huw Pill · Bank of England · United Kingdom · Iran

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