The Bank of England has raised Bank Rate to 4% from 3.75%, with one member of its Monetary Policy Committee, Mann, voting for a larger rise of 0.5 percentage points, to 4.25%. The Bank now expects UK CPI inflation to rise to around 5% by the middle of next year, and says the inflationary pressure in the pipeline justifies the increase.

That forecast is the news, because the rise itself was expected. As of October 13, traders priced an 88% chance of a quarter-point increase in November, according to Mortgage One. The Bank's September projections had inflation peaking above 4% in early 2027.

The committee has moved too. On September 17 it held Bank Rate at 3.75% in a 6-3 vote, with three members, Mann, Greene and Pill, voting for an immediate rise to 4%. Mann has now voted for 4.25%.

The pressure looks energy-led. The Bank's September minutes cited a 36% rise in Brent crude and a 78% rise in UK wholesale gas prices since July, and the committee described a longer supply disruption. Official data show CPI inflation rose to 3.5% in September from 3.1%, with core at 2.8%, in line with forecasts. A Bank survey found no evidence that employers are building an inflation premium into pay awards.

That matters for bonds. Long-dated gilt yields had retreated in late October and early November, which suggested the tightening path was losing momentum. A rate rise paired with a forecast of around 5% inflation reopens the term-premium pressure, the extra yield investors demand for holding long bonds, and could weigh on long-dated Treasurys if gilt yields resume climbing.

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