UK hikes rates with eye on Trump’s next Middle East move

U.S. President Donald Trump’s midterm election losses haven’t helped the U.K. economy — yet. The Bank of England’s nine-member Monetary Policy Committee announced on Thursday it has overwhelmingly voted to increase interest rates to 4% from 3.75%, the first time since August 2023 to combat rising prices driven by the war in Iran.

Unlike the U.S. Federal Reserve and European Central Bank, the Bank of England has been reluctant to raise rates for fear of denting the British economy. Until now, Governor Andrew Bailey and other MPC members have preferred to wait and see whether higher energy prices spilled over more broadly. But the Bank was forced to increase rates after U.K.

inflation came in at 3.5% in September, while the economy posted better-than-expected growth figures — raising the risk prices could take off. The MPC on Wednesday voted 8-to-1 to raise rates, arguing the energy shock since the war began has built “sufficient” inflation pressures to justify a hike. The dissenting vote from Catherine Mann was for a larger increase of 0.5 percentage points.