Bank of England Raises Rate to 4%

The Bank of England raised its benchmark interest rate by a quarter point to 4%, its first increase in more than three years, as energy-price pressures linked to the Iran conflict pushed inflation to 3.5% in September, above its 2% target. Officials forecast inflation could approach 5% by the middle of next year. The Monetary Policy Committee voted 8-1, with Catherine Mann favoring a larger increase to 4.25%. Governor Andrew Bailey said further hikes were possible if the conflict persisted, but cautioned that the decision did not signal an inevitable series of increases. The Bank warned that businesses’ temporary ability to absorb higher energy costs may fade, potentially raising household prices even as higher rates increase borrowing costs.