Interest rates hiked to 4% in first increase in over three years

The Bank of England has raised its benchmark interest rate to 4%, marking the first increase in more than three years, and indicated another rise may follow unless the US‑Iran war is settled.

The hike lifted the rate from 3.75% in an effort to curb inflation driven by higher oil prices linked to the Middle East conflict. The rate‑setting committee voted eight to one in favour, while a single member pressed for a larger increase to 4.25%.

Governor Andrew Bailey said the decision “shouldn't be seen as the first in an inevitable long sequence of hikes”, and warned “unless the conflict in the Middle East is resolved, neither does it seem likely to be the last increase”. He added “Put simply, it requires real progress towards settling the conflict in the Middle East,” and said he could “see the argument” for another rise, but any further move would take a “more conditional approach” depending on energy prices and inflation. The higher rate will raise borrowing costs for mortgages, loans and credit cards, while offering savers better returns.

Committee members expressed differing views on future policy. Clare Lombardelli said there is “likely to be a case for a further increase in rates in the near term”, and Megan Greene warned that “additional hikes” could be needed depending on the impact of inflation on wages, prices and the jobs market. Alan Taylor described the move as a “risk-management 'one-for-now' insurance hike”.