The Coin on the Table: Britain Turns Up the Heat While the Fed Plays Wait-and-See

The Bank of England (BoE) raised its main interest rate by a quarter point to 4% on Thursday, its first hike since 2023, as US consumer prices rose faster. American inflation reached 3.7% in the year to September, compared with 3.5% in Britain. The BoE expects UK inflation near 5% by mid-2027, or 6.2% if energy remains expensive for longer.

The Monetary Policy Committee voted 8-1 to raise the interest rate to 4%, with Catherine Mann preferring a half-point increase. Governor Andrew Bailey wrote in the minutes that “Without news which softens the risks to inflationary pressures, I can see the argument for a further increase in rates.” The move leaves Britain’s rate above the Federal Reserve’s target range of 3.75% to 4%.

The Fed raised rates in September before holding them in October, saying it wanted more information before acting again. Britain’s outlook has been weakened by its exposure to imported gas: gas supplies 62% of household energy use in Britain, the highest share in the G7, according to the Resolution Foundation. The National Institute of Economic and Social Research described the United States as a major oil producer, while the US posted record net energy exports in 2025, per the EIA.

The pound held near $1.3468 as two-year gilt yields, which track rate bets, rose about 0.03 percentage points to 4.77%. Traders now price about three more UK hikes by the end of 2027, a path that would lift British rates above those projected for the US. “we only see room for one more hike over the next year compared with the three implied by markets,” said Vivek Paul, UK chief investment strategist at the BlackRock Investment Institute.

Oil has fallen more than 7% since the US midterms, but every dissenter at the Fed and Bank of Japan last week wanted higher borrowing costs. The Fed meets December 8-9 and the BoE on December 17.