Expectations are mounting that the Bank of England’s Monetary Policy Committee will raise the base rate on Thursday.
A Reuters poll of 63 economists found 54 expect the Bank to increase rates by 25 basis points from 3.75% to 4%, a sharp turnaround from September when around 90% predicted rates would remain unchanged for the rest of 2026.
A hike would be the first increase in the base rate since August 2023.
At the MPC’s September meeting, three of its nine members voted to raise rates to 4%, while six backed keeping them at 3.75%.
Boon Brokers managing director Gerard Boon says: “The broker team and I expect the Bank of England’s base rate to increase by 25 basis points on Thursday.
“From our perspective as brokers assisting the general public, this is a frustrating prediction.
“The Bank of England is trying to tackle a supply-side inflation problem with a demand-side solution, by reducing overall demand in the economy.
“It’s like trying to solve a drought by making water more expensive. People use less, which eases pressure on reservoirs, but this doesn’t make it rain.”
Boon says the Bank is in a difficult position because changing the base rate is its main tool for bringing inflation back to its 2% target.
He adds: “At a time when cost-of-living pressures are mounting in the UK, increasing their base rate will likely trickle through to further costs on consumers.
“Ideally, the government and Bank of England should work together to urgently tackle the supply-side inflation issues rather than forcing a reduction in spending through their base rate increase.”
AJ Bell head of financial analysis Danni Hewson says: “Borrowers are braced for at least one rate hike before the clock chimes midnight on this tumultuous year, and consumer confidence has been jarred by the prospect of prices edging ever higher in the wake of the ongoing conflict in the Middle East.”
Mortgage broker Dale Shaw says: “My prediction is a rise to 4%.
“With energy costs pushing inflation well above the 2% target, the Bank can’t hold off much longer.
“The good news is that fixed rates are actually coming down, with two major high street lenders announcing cuts of up to 22 basis points today.
“That’s because lenders hedged against the base rate rise weeks ago, so it is already reflected in what you are being offered.”
But not everyone agrees with the prevailing forecasts.
John Charcol mortgage technical manager Nicholas Mendes believes a “hold” is the most likely outcome of Thursday’s meeting.
He says: “While pricing points firmly towards a rate rise, I don’t think it’s a foregone conclusion.
“Economists are already divided on how far the Bank will go beyond this week and even the MPC’s more hawkish members have questioned whether the level of tightening the market expects is needed.
“Governor Andrew Bailey and deputy governor Sarah Breeden have both pointed to firms absorbing the energy shock rather than passing it on, and there is little sign yet of the second-round effects on wages and prices that would justify starting a tightening cycle.
“Higher swap rates and gilt yields have already done much of the Bank’s work, with the average mortgage rate reaching 6% in October.
“The MPC may prefer to let that tightening feed through before acting.”
