Boe to Hike Rates by November as Inflation Risks Rise

Barclays and UBS now expect the Bank of England to raise interest rates to 3.90% by November. The current policy rate stands at 3.75%. Both firms argue that inflation risks have increased significantly. They believe the central bank must act sooner rather than later to protect its credibility.

The Bank of England held rates steady at 3.75% on Thursday. Its forecast indicates inflation could exceed 4% early next year. Meeting minutes revealed a more hawkish tone. This signals a shift toward tighter policy, aligning with moves by the Federal Reserve and the European Central Bank.

UBS Forecasts Quarterly Cuts In 2027

UBS economists led by Anna Titareva predict hikes in November 2026 and February 2027. They warn that higher inflation poses a greater cost than early tightening. The bank expects to begin cutting rates in the fourth quarter of 2027. These cuts would occur at a quarterly pace. The base rate should return to 3.25% by the third quarter of 2028.

J.P. Morgan shares this view. It also anticipates rate increases in November 2026 and February 2027. The consensus among these major brokerages is that the central bank will resume tightening. This follows a period of policy pause.

Energy Prices Drive Inflation Concerns

Barclays strategists note a dramatic change in the energy outlook. The medium-term perspective has worsened in recent weeks. The widening conflict in the Middle East fuels these concerns. Persistent price growth remains a primary risk for global central banks. The Bank of Japan raised rates to a 31-year high on Friday.

Market data from LSEG shows a 63% probability of a November hike. Traders also expect an increase in December. Goldman Sachs agrees with the November hike prediction. However, it notes that softer economic data or lower energy prices could lead to a hold.

Diverging Views Among Major Banks

Morgan Stanley expects a prolonged hold if energy prices ease. BofA Global Research views any additional hike as precautionary. It does not see a broader tightening cycle starting. The divergence highlights the uncertainty surrounding future inflation trends.

GN auto markets/bonds: interest rates reports indicate a split in analyst forecasts. Some see immediate action, while others wait for data. The Bank of England faces a difficult balance. It must fight inflation without stifling economic growth.