Interest rate moves higher likely in coming months, Bank of England economist states

In the latest British pound update, the Bank of England will probably need to raise policy rates next month and again in early 2027 to combat advancing inflation, its chief economist has stated. The chief economist is one of several the Bank's officials who believe the UK economy has added in strength over the last year, handing workers the power to bid up wages.

Key points

• With inflation projected to rise to 5% in spring next year.
• Financial markets see UK policy rates to rise to close to 5% in 2027.
• Households are also likely to reduced on spending in the new year.
• While the Bank has not seen signs of wage rises or businesses being able to pass on higher costs to consumers.

What happened: British pound

With inflation projected to rise to 5% in spring next year, driven by high oil and gas prices as a consequence of the Iran war, Pill projects public and private sector workers to demand substantial pay advances, which would keep inflation high for a longer period. While the Bank has not seen signs of wage rises or businesses being able to pass on higher costs to consumers, Pill noted the absence of signs was not signs of absence. Financial markets see UK policy rates to rise to close to 5% in 2027.

Households are also likely to reduced on spending in the new year, when the energy price cap is forecast to rise to nearly £2,000 for a typical home and council tax bills increase by an average of nearly 5%.

Why traders are watching British pound

Bank of England expectations, UK inflation and gilt yields are the main drivers of sterling. Shifts in the rate outlook can move GBP/USD and EUR/GBP sharply.

Political and fiscal news in the UK also feeds into gilt markets, which in turn affects the pound and UK-listed stocks.

Market reaction and data

Crypto prices at the time of writing, from Binance spot data (2026-11-14 12:21 UTC):

What to watch next for British pound

Traders will track UK inflation, wage and GDP data, comments from Bank of England officials and moves in gilt yields.

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FAQ

What is the latest British pound news?

The Bank of England will probably need to raise policy rates next month and again in early 2027 to combat advancing inflation, its chief economist has stated.

What moves the British pound?

Sterling mainly reacts to Bank of England rate expectations, UK inflation and growth data, and changes in UK government bond yields.

Where does this information come from?

This report is based on coverage from The Guardian Business, checked against market data where available. It is a summary for information only and not investment advice.