The Bank of England is widely expected to raise interest rates for the first time since August 2023, as economists and traders anticipate a hike to 4% from the current 3.75%. The decision, set to be announced on Thursday, November 5, comes amid rising inflation pressures in the UK economy.
Consumer Prices Index (CPI) inflation reached 3.5% in September, its highest level in 11 months, driven partly by higher petrol and diesel prices due to the Middle East conflict. The energy price cap is also set to increase by 3.6% in October and a further 22% in January, which could push inflation even higher.
Analysts like Ellie Henderson from Investec suggest that the Monetary Policy Committee (MPC) may act preemptively to prevent temporary price shocks from becoming permanent. Suren Thiru, chief economist for the ICAEW, agrees, calling the expected rate rise a 'precautionary hike to contain price pressures.'
Despite economic challenges, including higher energy costs and consumer spending pressures, the UK economy grew by 0.1% in August. The unemployment rate also fell to 4.7% in the three months to August, its lowest level in over a year.