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Britain is about to do something it hasn't done in more than three years: raise interest rates. According to a Reuters poll published October 15, a strong majority of economists now expect the Bank of England to lift its Bank Rate by 25 basis points to 4.0 percent in November — a sharp reversal from just a month ago, when about 90 percent of those same economists expected rates to stay on hold for the rest of the year.
What changed economists' minds
The poll, conducted between October 12 and 14, found 54 of 63 economists forecasting the November hike, which coincides with the central bank's next set of quarterly forecasts. The driver is stubbornly high inflation: UK prices are running at 3.1 percent — already above the Bank's 2 percent target for more than five years — and are forecast to rise to roughly double the target. Hefty energy price rises stemming from the US-Israeli war with Iran, which began in late February, have so far not spilled into broader consumer prices, but economists no longer expect that luck to hold. Sonali Punhani, UK economist at Bank of America, who recently flipped from hold to hike, put it bluntly: "The bigger pickup in inflation is still ahead of us rather than behind us." With the British economy consistently beating expectations and government bond yields climbing, the risk calculus has shifted — hiking now is safer than waiting and discovering the inflation was entrenched.
What happens after November
Beyond next month, even the economists are divided: there is still no majority view on further rises, though financial markets are fully pricing in four quarter-point increases by the end of next year. That gap between cautious forecasters and aggressive markets is where the real story sits — if inflation keeps climbing, the Bank may be forced to follow the market's script rather than its own. For borrowers, savers and investors across Britain, November's decision will reset expectations for years. And in a global economy where the US is weighing its own rate decisions on hot inflation data, Britain's move may be the first domino of a new tightening cycle. Stay with Global Insight for the fallout — including our analysis of Q3 bank earnings and AI-trade jitters and India's rate decision and market reaction.