Is today's interest rate rise the first of many and can the Bank of England keep inflation in check? This is what economists say

Updated: 07:08 EDT, 5 November 2026 The Bank of England raised interest rates to 4 per cent in a blow to borrowers already battling higher mortgage and energy costs.Eight members of the Monetary Policy Committee voted to increase by a quarter of a point, while Catherine Mann voted to raise by 0.5 per cent. It is the first time the bank has increased borrowing costs since August 2023, as it seeks to tame surging inflation driven by higher energy costs and the conflict in the Middle East.Economists and traders had expected the rate hike after September’s inflation reading reached 3.5 per cent, its highest level in 11 months and well above the Bank’s 2 per cent target.The BoE hopes that making borrowing more expensive will help to dampen demand and act as a drag on spending and investment, keeping inflation in check which it now expects to rise to 5 per cent by the middle of 2027. The Iran war has gone on for longer than anticipated, and the BoE is now playing catch-up with other central banks, including the Federal Reserve and European Central Bank, which have already raised rates this year.The Bank adopted a ‘wait and see’ approach in the immediate months after the outbreak of the conflict, with hopes that higher gilt yields - which rose to multi-decade highs last month and have dragged mortgage rates higher - would do the brunt work.But with the conflict now in its ninth month, there are concerns that higher inflation could become embedded in the economy. The Bank of England raised base rate to 4%, the first increase in over three years Are there more interest rate hikes to come? Economists are split on whether today’s decision marks the start of a series of rate hikes. Much will depend on whether the US and Iran can broker a peace deal, which would alleviate some of the pressure on the BoE to act again.Kallum Pickering, chief economist at Peel Hunt, said there is ‘little evidence nor reason to believe this will turn into a persistent inflation shock.’He added: ‘BoE policymakers do not want to repeat the 2022 experience when they fell behind the curve in curbing an inflation surge which they had initially described as ‘transitory’.Assuming that energy prices fall back next year, any 'second-round' effects would be muted, said Paul Dales, chief UK economist at Capital Economics.This means this week's meeting is unlikely to mark the start of a series of rate hikes, he said, expecting policymakers to start cutting interest rates in late 2027 and into 2028.Deutsche Bank and Morgan Stanley disagree, forecasting another rate rise in February to bring the base rate to 4.25 per cent.Governor Andrew Bailey indicated that the Bank would make 'adjust Bank Rate as necessary to ensure CPI inflation returns to the 2 per cent target in the medium term.' In the immediate term, today’s decision will pile further pressure on homeowners who will see their mortgage rates rise further, with some economists predicting more pain into next year.Figures from UK Finance show the rate hike will add £30.72 a month to the average tracker repayment, and £14.28 to the variable rate.And inflation, already above the Bank's 2 per cent target, is expected to rise even further this winter as Ofgem's price cap is forecast to rise by around 25 per cent in January 2027.The latest figures from the Office for Budget Responsibility, released alongside the Budget last week, show inflation climbing to nearly 4 per cent at the start of 2027. The Bank of England expects it to increase to 5 per cent by the middle of the year. DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you