Bank of England: Central bank raises interest rates for the first time in three years

London. The British central bank has raised interest rates for the first time in three years, responding to the surge in inflation on the island. The Bank of England (BoE) raised its key interest rate by a quarter point to 4.00 percent on Thursday.

Experts interviewed by Reuters had expected the move. Inflation, driven by high energy prices, recently rose to 3.5 percent, putting the central bank under pressure. This aims for an inflation mark of just 2.0 percent.

Due to its dependence on natural gas imports, Great Britain is more affected by the consequences of the energy price shock caused by the Iran war than many other Western countries. BoE chief Andrew Bailey had explicitly warned that a protracted conflict in the Middle East could require tighter monetary policy. The financial markets are expecting the BoE to make several further increases next year.

With the interest rate increase, the BoE joins the group of central banks that are countering the inflation fueled by the oil price shock. In September, the US Federal Reserve raised interest rates for the first time this year and, according to experts, could do so in December. The European Central Bank has already taken two steps upwards in 2026 and could take another step in December.