BoE set to hike interest rate for the first time this year
- 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.Next release: Thu Nov 05, 2026 12:00
Frequency: Irregular
Consensus: 4%
Previous: 3.75%
Source: Bank of England
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.
