BoE expected to hike interest rate to 4.00%

The Bank of England (BoE) is set to reveal its latest monetary policy decision on Thursday, coinciding with its seventh rate-setting meeting of 2026.

Market analysts expect the ‘Old Lady’ to increase its policy rate by a quarter percentage point to 4.00%, the highest level since November 2025.

As usual, the Monetary Policy Committee’s (MPC) decision will be followed by the publication of the meeting Minutes, which will detail the internal discussions that shaped the outcome.

The central bank maintained interest rates at 3.75% in September amid a split vote from the MPC (6-3), indicating an impasse to assess the potential effects on the UK economy of the still ongoing crisis in the Middle East.

Attention remains broadly on inflation and geopolitics

In his latest comments, Bank of England Governor Andrew Bailey said above-target UK inflation remained “enormously frustrating" but cautioned that it was still too early to assess the strength of any second-round effects. So far, those effects appear subdued, with businesses focusing on cutting costs rather than raising prices more aggressively.

Bailey said the UK economy had proved more resilient than expected, although activity remained weaker than the Bank would like. He also noted that developments in the Middle East were the main factor driving gilt yields, adding another layer of uncertainty to the policy outlook.

Overall, Bailey’s message was cautious rather than decisively hawkish. The BoE still needed more evidence on whether the inflation shock is becoming embedded before it can form a firm view on the next policy move.

How will the BoE interest rate decision impact GBP/USD?

Market participants appear broadly inclined toward a rate hike on Thursday at 12:00 GMT.

Beyond the rate decision per se, attention will also focus on the vote split among MPC members, which might be a market mover for the British Pound if it indicates an unusual outcome.

In the run-up to the meeting, GBP/USD advances for the fourth week in a row, looking to further fade the sharp downward trend initiated in late August.

"Cable keeps the multi-week recovery well in place, managing to clear its key 200-day SMA around 1.3420, therefore allowing for the rebound to continue," said Pablo Piovano, Senior Analyst at FXStreet. Next on the upside comes the September high at 1.3567 (September 9), followed by the August ceiling at 1.3675 (August 21).

On the downside, there are no support levels of note until the 2026 floor at 1.3137 (October 14), prior to the November 2025 valley at 1.3010 (November 4), Piovano adds.

“Momentum indicators seem to favour extra gains, as the Relative Strength Index (RSI) climbs past the 65 level, while the Average Directional Index (ADX) around 22 is indicative of a fairly firm trend,” he concludes.