The Bank of England raised its key interest rate by 25 basis points to 4% on Thursday, marking its first rate increase since August 2023. With this decision, it becomes the last major central bank to launch a tightening cycle since the conflict involving the U.S., Israel, and Iran began eight months ago. The shift was broadly anticipated, with LSEG data showing financial markets had priced in a greater than 99% probability of an increase before the announcement. Traders are now assigning a one-in-four chance to another potential rate hike taking place in December.
Key points
The United Kingdom has become the last major central bank to initiate a tightening cycle…: The United Kingdom has become the last major central bank to initiate a tightening cycle since the outbreak of conflict eight months ago.
Financial markets fully anticipated the central bank's decision to lift borrowing costs d…: Financial markets fully anticipated the central bank's decision to lift borrowing costs during Thursday's policy meeting.
Market pricing currently reflects a one-in-four probability that policymakers will choose…: Market pricing currently reflects a one-in-four probability that policymakers will choose to raise interest rates again in December.
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A person shields themselves from the rain while walking near the Bank of England building on the day the Monetary Policy Committee lowered interest rates, in London, Britain, Dec.18, 2025.
Toby Melville | Reuters
The Bank of England announced its first interest rate hike in over three years on Thursday, as it raised its key rate by 25 basis points to 4%.
The widely anticipated move marked the bank's first hike since Aug. 2023, and made it the last major central bank to embark on a tightening cycle since the U.S. and Israel went to war with Iran eight months ago.
Ahead of the decision being announced, markets had been pricing in more than a 99% chance of a rate hike, according to LSEG data. Traders were also pricing in a one-in-four chance of a further hike in December.
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