London Daily

Focus on the big picture.
Saturday, Apr 04, 2026

Fifth consecutive hike as interest rate raised to 1.25% by Bank of England

Fifth consecutive hike as interest rate raised to 1.25% by Bank of England

There is a marked shift in the Bank's outlook and plan to tackle inflation as it signals there is a chance of more aggressive action ahead to help cool the pace of price growth in the economy.

The Bank of England has raised interest rates for the fifth time in a row to 1.25% and set the scene to act more "forcefully" ahead because of a mounting inflation threat.

There had been speculation of a more aggressive tightening after the sharpest rate hike since 1994 of 0.75 percentage points was imposed by counterparts at the US central bank last night.

But the UK's Bank rate was raised by 0.25 percentage points, as financial markets and economists had expected, continuing the gradual increases that began in December last year as the rate of inflation gathered pace.

However, the Bank said on Thursday it was now forecasting that the headline rate of inflation would top 11% in the autumn - a rise of almost 1 percentage point on the figure it had expected just last month to see at the year's end.


The rate-setting committee was split 6-3 on the rate hike vote, with the minority favouring a rise of 0.5 percentage points.

The BoE dropped its guidance from May when it said most committee members believed "some degree of further tightening in monetary policy may still be appropriate in the coming months".

Crucially, the minutes of the latest meeting read: "The committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response."

That was seen as guidance that, as far as Bank rate is concerned, there was now a greater chance of a 0.5% percentage point increase ahead.

As the Bank was giving its update, growing fears of a global recession were continuing to take a hold of financial markets, with stock markets in Europe widely down by more than 2.5% as the recent rush for safe havens reared its head again.

The reopening of economies after the pandemic and, latterly, the effects of Russia's war in Ukraine have been responsible for the bulk of the soaring costs across the world.

The UK's main inflation measure has since hit a 40-year high, leaving economic growth intensely choked by a cost of living squeeze that is only tipped to intensify as energy, food and fuel bills rise sharply.

The anticipated rise of more than £800 in the energy price cap due in October was largely responsible for the adjustment to the Bank's inflation forecast.

Its latest rate action will mean there is further pain for millions of mortgage holders on tracker or standard variable deals.

There is some small relief for savers as savings rates lag inflation considerably.

Although many of the price increases in the economy are outside the Bank's control, it is keen to keep a lid on rises in wages for fear that levels matching the pace of price increases will only make the inflation problem worse.

Its plea for wage restraint has come under attack from unions, which argue that plunging living standards are no fault of their members.

The rail network is set to become the first national battleground in strike action expected to start next week.

Chancellor Rishi Sunak, who has delivered two rounds of financial help to help with rising living costs to date, welcomed the Bank's move but the reaction from business groups was more cautious.

Alpesh Paleja, lead economist at the CBI, a business lobby group, said: "With inflation high and price pressures remaining acute, the Bank of England has rightly raised interest rates again to anchor inflation.

"But with the outlook looking weaker, monetary policy is walking an increasingly fine line between taming inflation and supporting economic activity.

"We expect only meagre economic growth ahead, as a historic squeeze on household incomes bites hard on spending.

"Monetary policy can only do so much, and must now be coupled with government action to prevent a deeper and more prolonged downturn."

Newsletter

Related Articles

0:00
0:00
Close
Prince Harry and Meghan’s Australia Visit Set to Draw Heightened Global Attention
UK Considers Entry Fees for Overseas Visitors at Major Museums Ahead of 2026 Travel Season
UK Prime Minister and Kuwait Crown Prince Coordinate Security Response After Regional Escalation
Calls Grow to Expand Fully Paid Maternity Leave for UK Teachers Amid Workforce Pressures
UK Secures Tariff-Free Access to US Market in Landmark Pharmaceuticals Agreement
Trump Projects Strength in Critique of UK Leadership and Naval Readiness
UK FinTech Setback as VibePay and Smartlayer Cease Operations Amid Funding Pressures
UK Leads Global Coalition of Over Forty Nations to Address Strait of Hormuz Crisis
UK Firms Urged to Accelerate Preparation as New Sustainability Reporting Rules Take Shape
UK Moves Rapid Sentry Air Defence System to Kuwait After Drone Strike Escalation
Transatlantic Relations Tested as UK Seeks Balance While Trump Reshapes Strategic Approach
Trump’s Strategic Pressure on UK Seen as Push for Stronger Alignment and Fairer Terms
UK Focuses on Trade Finance to Secure Critical Materials for Defence and Energy Sectors
Majority of UK Businesses Hit by Middle East Conflict While Confidence Holds Firm
UK Royal Navy Faces Renewed Scrutiny as Debate Intensifies Over Capability and Readiness
Reform UK Faces Mounting Distractions as Policy Agenda Struggles to Gain Traction
Investigation Launched Into Northern Cyprus IVF Clinics After UK Families Receive Incorrect Sperm
International Meeting Issues Unified Call to Safeguard Navigation Through Strait of Hormuz
Potential Strait of Hormuz Closure Raises Concerns Over UK Food and Medicine Supply Chains
UK Leads Coalition of Over Forty Nations Urging Iran to Reopen Strait of Hormuz
UK Secures Tariff-Free Access for Medicines in Landmark US Pharma Trade Agreement
King Charles III Invited to Address Joint Session of U.S. Congress in Rare Diplomatic Honor
Debate Grows Over Whether Expanded North Sea Drilling Can Reduce UK Energy Bills
UK Faces Heightened Risk of Jet Fuel Shortages, Airline Chief Warns
UK Ends Police Investigations into Lawful Social Media Posts After Review Finds Overreach
Abramovich Moves to Establish Charity for Frozen Chelsea Sale Proceeds Amid UK Dispute
Starmer Reaffirms NATO Commitment While Responding to Trump’s Strategic Critique
UK Aid Reductions Raise Fears of Severe Human Impact Across Parts of Africa
UK Signals Renewed Push for EU Cooperation as Iran Conflict Reshapes Security Landscape
Bank of England Signals Caution as Bailey Advises Markets Against Expecting Rate Hikes
UK to Convene Global Coalition to Restore Shipping Through Strait of Hormuz
Trump Signals Possible NATO Reassessment, Emphasizes Stronger U.S. Strategic Autonomy
Australia Joins British-Led Efforts to Reopen Strait of Hormuz Amid Escalating Tensions
King Charles Plans US State Visit as UK Strengthens Ties with Trump Leadership
UK Regulator Launches Investigation Into Microsoft’s Business Software Practices
Kanye West Set for High-Profile Return to UK Stage at Wireless Festival
Trump Presses Europe to Strengthen Commitment as Iran Conflict Escalates
UK to Deploy Additional Troops to Middle East Amid Rising Regional Tensions
UK Authorities Face Claims of Heavy-Handed Measures in Monitoring Released Pro-Palestine Activists
Trump Calls on UK to Secure Its Own Energy as Iran Conflict Intensifies
Nigel Farage Declines Invitation to UK Conservative Conference Led by Liz Truss
Trump Warns Allies to Take Responsibility as Rift Deepens with UK and France Over Iran Conflict
How Britain’s Prime Minister Controls U.S. Bomber Access in Escalating Iran Conflict
Trump Urges Allies to Secure Their Own Oil Supplies as Hormuz Crisis Disrupts Global Energy
Russia Expels British Diplomat as UK Pushes Back Against Pressure
White House App Faces Scrutiny After Claims of Continuous User Location Tracking
BBC Faces Scrutiny Over Allegations of Paid Content Linked to Saudi Arabia
UK-France Coastal Patrol Agreement Nears Breakdown Amid Migration Pressures
UK Police Detain Pro-Palestine Activist Again Weeks After Bail Release
FTSE 100 Advances as Energy and Mining Shares Gain Amid Middle East Tensions
×