BoE interest rate expected to rise to 4.00%

• A rise to 4.00% is expected for the Bank of England’s policy rate.
• Inflation in the UK continues to exceed the BoE’s target by a wide margin.
• Near two-month highs, GBP/USD holds around 1.3500.

The seventh rate-setting meeting of 2026 will bring the Bank of England’s (BoE) latest monetary policy announcement on Thursday.

A quarter-percentage-point increase to 4.00% is anticipated by market analysts, taking the ‘Old Lady’ policy rate to its highest since November 2025.

Following the Monetary Policy Committee’s (MPC) announcement, the meeting minutes will be released as usual, setting out the discussions behind the decision.

September’s 6-3 MPC vote left interest rates unchanged at 3.75%, signalling an impasse as policymakers assessed the possible impact on the UK economy of the continuing crisis in the Middle East.

Inflation and geopolitics retain the market’s attention

Above-target UK inflation was “enormously frustrating”, Bank of England Governor Andrew Bailey said in his latest remarks. He nevertheless warned that the strength of any second-round effects could not yet be judged. Such effects have so far appeared limited: businesses have concentrated on reducing costs rather than pushing through more aggressive price rises.

Although economic activity was still softer than the Bank would wish, Bailey said the UK economy had shown greater resilience than anticipated. He identified developments in the Middle East as the principal driver of gilt yields, creating further uncertainty around the policy outlook.

Rather than signalling a clearly hawkish stance, Bailey struck a cautious note overall. Before reaching a firm judgement on its next policy step, the BoE still required further evidence of whether the inflation shock was becoming entrenched.

GBP/USD faces the BoE rate decision and MPC vote split

A rate increase appears to be the broad expectation among market participants ahead of Thursday’s announcement at 12:00 GMT.

Alongside the rate decision itself, traders will scrutinise how MPC members divide their votes. An unusual outcome could prompt a move in the British Pound.

Ahead of the meeting, a fourth consecutive week of gains in GBP/USD is further unwinding the steep decline that began in late August.

FXStreet Senior Analyst Pablo Piovano said: "Cable keeps the multi-week recovery well in place, managing to clear its key 200-day SMA around 1.3420, therefore allowing for the rebound to continue,". The next upside level is September’s peak of 1.3567 (9 September), with August’s high of 1.3675 (21 August) beyond that.

Piovano adds that meaningful downside support does not emerge until the 2026 low of 1.3137 (14 October). Below that lies the November 2025 trough of 1.3010 (4 November).

He concludes: “Momentum indicators seem to favour extra gains, as the Relative Strength Index (RSI) climbs past the 65 level, while the Average Directional Index (ADX) around 22 is indicative of a fairly firm trend,”