BoE expected to hike interest rate to 4.00%
- The Bank of England is expected to raise its policy rate to 4.00%.
- UK inflation figures remain well above the BoE’s goal.
- GBP/USD remains close to the 1.3500 mark, or two-month highs.
The Bank of England (BoE) is set to reveal its latest monetary policy decision on Thursday, coinciding with its seventh rate-setting meeting of 2026.
Market analysts expect the ‘Old Lady’ to increase its policy rate by a quarter percentage point to 4.00%, the highest level since November 2025.
As usual, the Monetary Policy Committee’s (MPC) decision will be followed by the publication of the meeting Minutes, which will detail the internal discussions that shaped the outcome.
The central bank maintained interest rates at 3.75% in September amid a split vote from the MPC (6-3), indicating an impasse to assess the potential effects on the UK economy of the still ongoing crisis in the Middle East.
Attention remains broadly on inflation and geopolitics
In his latest comments, Bank of England Governor Andrew Bailey said above-target UK inflation remained “enormously frustrating" but cautioned that it was still too early to assess the strength of any second-round effects. So far, those effects appear subdued, with businesses focusing on cutting costs rather than raising prices more aggressively.
Bailey said the UK economy had proved more resilient than expected, although activity remained weaker than the Bank would like. He also noted that developments in the Middle East were the main factor driving gilt yields, adding another layer of uncertainty to the policy outlook.
Overall, Bailey’s message was cautious rather than decisively hawkish. The BoE still needed more evidence on whether the inflation shock is becoming embedded before it can form a firm view on the next policy move.
How will the BoE interest rate decision impact GBP/USD?
Market participants appear broadly inclined toward a rate hike on Thursday at 12:00 GMT.
Beyond the rate decision per se, attention will also focus on the vote split among MPC members, which might be a market mover for the British Pound if it indicates an unusual outcome.
In the run-up to the meeting, GBP/USD advances for the fourth week in a row, looking to further fade the sharp downward trend initiated in late August.
"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," said Pablo Piovano, Senior Analyst at FXStreet. Next on the upside comes the September high at 1.3567 (September 9), followed by the August ceiling at 1.3675 (August 21).
On the downside, there are no support levels of note until the 2026 floor at 1.3137 (October 14), prior to the November 2025 valley at 1.3010 (November 4), Piovano adds.
“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,” he concludes.
Economic Indicator
BoE Minutes
The minutes of the Bank of England (BoE) Monetary Policy Committee (MPC) meetings are published alongside the committee decision. The minutes give a full account of the policy discussion, including differences of view among members. They also record the votes of each member of the MPC. Generally speaking, if the BoE is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the GBP.
Read more.Next release: Thu Nov 05, 2026 12:00
Frequency: Irregular
Consensus: -
Previous: -
Source: Bank of England
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.