Banks split on whether the Bank of England is forced into a November rate rise

The Bank of England kept its benchmark interest rate unchanged at 3.75 percent on Thursday, as surging global energy costs fed through to prices⁵. The BBC reported that rates were held but that the Bank signalled a rise if energy prices stay high, noting that the US Federal Reserve announced its first hike in three years on Wednesday and that the European Central Bank has raised rates twice since June⁹.

Markets did not read the hold as the end of the argument. Reuters reported that markets see an 80% chance policymakers move in November, with Russ Mould of AJ Bell saying the Bank could be forced into a rate rise¹. Bloomberg’s framing was that UK retail sales rose as the Bank hinted at a hike⁴.

Where the forecasters disagree

The split among the banks is unusually clean. Barclays and UBS Global Research expect the Bank of England to raise rates as soon as November, citing mounting inflation risk². ING is holding the other side: its call is a hold in November, described as a close one, with rates staying on hold into 2027³.

The data released this week cut towards the hawkish reading. UK retail sales rebounded in August, helped by online sales, as consumers shrugged off recently rising inflation⁸. The currency has moved the other way. Sterling is vulnerable to further losses after the Bank declined to endorse the tightening cycle that markets had already priced, leaving the gap between market pricing and the Bank’s own guidance as the live risk⁶.

What to watch

Alongside the rate decision, the Bank set out what it will do with its balance sheet. It said on 17 September that it will reduce its £488 billion portfolio of sovereign bonds acquired during quantitative easing⁷. That is a separate tightening channel from the policy rate, and it operates on the long end of the gilt curve rather than on the front end the November debate concerns.

Three markers follow. The first is the November meeting itself, where an 80% market-implied probability meets a divided set of bank forecasts^1,2,3. The second is energy prices, which the Bank named as the condition attached to a further rise⁹. The third is whether consumer spending holds up, since August’s rebound was recorded despite the inflation pickup rather than because it had faded⁸.