The Bank of England raised its key rate to 4%. The decision was announced at 15:00 Moscow time, the move was 25 basis points - from the previous 3.75%. The market expected exactly this decision.
In the minutes, the regulator warned of more to come. Further increases will most likely be needed: inflation could approach 5% by mid-2027.
A basis point is one hundredth of a percentage point. The Bank of England's rate sets the cost of money in the country. The pound's exchange rate, the yields on British bonds and risk appetite across all markets depend on it.
How did the committee vote?
Unanimously. All nine members of the Monetary Policy Committee voted for the increase. One wanted a move of 50 basis points (0.5 percentage points) at once instead of 25.
At the same time, there is no agreement on further action:
- Clare Lombardelli, Hugh Pill and Megan Greene - signaled that further increases will be needed
- Alan Taylor and Swati Dhingra - saw the move as insurance against the worst-case inflation scenario
- Andrew Bailey - the Governor of the Bank of England noted that elevated market rate expectations partly reflect a risk premium rather than the market's belief in further tightening
Why raise now specifically?
Prices accelerated. Consumer inflation in September was 3.5% year on year against a 2% target.
- Inflation forecast. By mid-2027 the regulator expects a figure of around 5% due to the conflict in the Middle East and expensive energy.
- A strong economy. Economic activity came in stronger than forecast, and this added arguments for a hike.
- New forecasts. GDP growth for 2027 has been raised to 1.3%, but activity should then weaken. Unemployment will reach 5.1% by 2028.
What happened with the markets?
As of the European session snapshot, the picture is mixed. Commodities and metals are up, crypto is down.
- Gold - up 1.41% to $4,116
- WTI - up 1.50% to $89.50
- S&P 500 - stood at 7,723
- US 10-year Treasury yield - held near 4.89%
- BTC - down 0.96% to $79,624
- Currencies - CAD looked the strongest, EUR the weakest
Key point: rates in the UK and the eurozone are now moving in the same direction, and this keeps the pound and the euro in the spotlight. The dates of the next meetings are worth keeping in the economic calendar.
What happens next?
Decisions meeting by meeting. The Bank of England will look at wage growth, business prices and the amount of spare capacity in the economy.
Europe is following the same path. ECB representative Zigman said a rate hike could be discussed as early as December. For weeks like these, it makes sense for a trader to pick a challenge suited to their market.
Were you in the pound at 15:00 Moscow time?
The rate was expected, the minutes were then parsed line by line. But the outcome of the day comes down to the volume you took part with. The same meeting breakdown on a two-thousand account yields a couple dozen dollars. On a hundred thousand - a sum of a different order, with the same stop-loss. Prop trading addresses exactly this arithmetic: a paid test of discipline and loss limits, then work on the company's account and a fixed share of the result for you. It's calmer to study the mechanics now than an hour before the next meeting.