The Bank of England is widely expected to raise interest rates on Thursday 5 November, in what would be its first increase since August 2023.
Why a rise is expected
Economists polled by Reuters expect Bank Rate to rise from 3.75% to 4%. According to Morningstar, financial markets were pricing in a 96.7% chance of an increase.
The main driver is inflation. Figures from the Office for National Statistics show consumer prices rose 3.5% in the year to September, up from 3.1% in August and well above the Bank's 2% target. Higher motor fuel prices made the largest upward contribution. In September, the Bank warned that inflation could rise above 4% early next year.
A split committee
The Monetary Policy Committee voted 6-3 to hold rates in September. The Reuters poll points to a 7-2 vote in favour of a rise this time. Markets are pricing in three to four further quarter-point rises in 2027, which would take Bank Rate to between 4.75% and 5%. However, some economists think the Bank may signal that rates are unlikely to climb that far. The decision is due at 12 noon on Thursday.
What it means for savers
- A higher Bank Rate usually feeds through to savings rates over time, but there is often a delay, and providers are not obliged to pass rises on in full.
- Variable-rate accounts are the most likely to change. Fixed-rate accounts keep the same rate until the term ends.
- Some of the highest easy-access rates apply only to limited balances or for a set period, so it is worth reading the terms.
- With inflation at 3.5%, savings earning less than that are losing spending power in real terms.
- Comparing the rate your existing savings pay with the wider market can help you judge whether they still suit your needs.
Looking ahead
Markets expect more rises next year, but nothing is certain. Inflation figures, energy prices and the Bank's own forecasts will all shape what happens next. The next inflation figures are due on 18 November.
Sources: Reuters, Hargreaves Lansdown, Office for National Statistics, Morningstar, The Independent
General information only, not financial advice. Interest rates and market expectations can change. If you are unsure what is right for you, consider speaking to a regulated financial adviser.