BoE raises interest rates by 25bps to 4.00% (as expected), in a 8-1 vote (exp. 7 were expected to vote for a hike, 2 were expected to vote for a hold; prev. 3 voted for a hike, and six for a hold), with Mann voting for a larger 50bps rise

VOTE: BoE raises Bank Rate by 25 bps to 4% Vote split 8-1 Mann votes for 50 bps rise All other members vote for 25 bps rise GUIDANCE: Stronger than expected activity data added to case for tighter monetary policy Monetary policy not on a pre-set path Bank Rate to be adjusted as necessary to return CPI inflation to 2% target in medium term Evidence to be assessed at each meeting INFLATION: Still limited evidence of second-round effects from higher energy prices ECONOMY: GDP growth likely to fall back in coming quarters FORECASTS: CPI expected to peak at around 5% in Q2 2027 in central scenario Adverse scenario shows CPI peaking at 6.2% in Q3 2027 Central forecast shows CPI at 4.4% in Q1 2027, 3.1% in Q1 2028, 1.9% in Q1 2029 (July: 3.2%, 1.7%, 1.9%) Central forecast shows CPI returning to 2% target in Q3 2028 (July: fall below target in Q1 2028) Market rates imply Bank Rate at 3.9% in Q4 2026, 4.9% in Q4 2027, 4.9% in Q4 2028, 4.7% in Q4 2029 GDP growth forecast at 1.6% in 2026, 1.3% in 2027, 1.2% in 2028 (July: 1.1%, 1.1%, 1.7%) Q3 headline GDP growth seen at +0.7% q/q (Sept: +0.4%) Unemployment rate forecast at 4.8% in 2026, 4.9% in 2027, 5.1% in 2028 (July: 5.0%, 5.3%, 5.2%) Private-sector regular wage growth forecast at 3.2% y/y in Q4 2026, 3.5% in Q4 2027, 3.4% in Q4 2028 (July: 3.0%, 3.1%, 3.1%) Real post-tax labour income growth forecast at -0.1% in 2026, -0.6% in 2027, 1.0% in 2028 (July: 0.1%, 0.5%, 1.1%) MARKET-IMPLIED BANK RATE PATH (conditioning assumption) Q4 2026: 3.9% (prev. 3.9%); trough Q4 2027: 4.9% (prev. 4.2%); peak, held from Q4 2027 to Q4 2028 Q4 2028: 4.9% (prev. 4.1%) Q4 2029: 4.7% (prev. 4.2%) Q1 2027: 4.2% (prev. 4.1%) COMMENTARY: Bailey Enough inflationary pressure now in pipeline from energy prices to raise rates Rate rise should not be seen as first in inevitable long sequence of increases Does not seem likely to be last increase unless Middle East conflict resolved Some of upward market curve explained by risk premia, not expected rates Current restrictiveness broadly appropriate Mann 50 bps rise warranted from risk management and credibility perspective Economy has crossed estimated threshold into high inflation, tight labour market regime Taylor Rate rise represents insurance against worse inflation outcomes Dhingra Rate rise represents insurance against worse inflation outcomes Greene Additional rate rises will likely be required Lombardelli Sees case for further near-term rate rise Pill Sees case for further near-term rate rise FISCAL: Budget likely to boost demand by 0.1% in 2026-27 Budget likely to drag on demand by a little over 0.1% by 2029-30 Budget likely to cut inflation by 0.25 ppts by Q2 2027 Budget likely to raise inflation by 0.25 ppts a year later as effect unwinds