Bank of England poised to lift key rate to 4 percent

The Bank of England is expected to raise its key interest rate on Thursday.

The move would mark the first increase in the central bank's policy rate since August 2023. Economists project that the nine members of the Monetary Policy Committee will vote to lift the rate from 3.75 percent to 4 percent.

Inflation in the United Kingdom reached an 11-month high of 3.5 percent in September. That figure exceeds the bank's target rate of 2 percent. The surge in prices has pressured rate-setters to act.

The primary driver of the inflation spike is rising fuel costs. The Iran war has created bottlenecks in the Strait of Hormuz. These disruptions have squeezed global supplies of oil and gas, pushing prices higher for consumers.

Ellie Henderson, an economist at Investec, stated that committee members likely have little patience for the recent price increases. She noted that the longer energy prices remain elevated, the greater the risk that a temporary shock becomes permanent.

The rate decision will coincide with the bank's release of quarterly economic projections for growth and inflation. Higher rates make borrowing more expensive, which typically slows spending and cools the economy. The U.S. Federal Reserve and the European Central Bank have also raised rates recently to address similar price pressures. U.K. rates had been falling from a 15-year high of 5.25 percent until the U.S. and Israel attacked Iran in late February.