Bloomberg Survey: BOE Expected to Raise Rates to 4% on Thursday, Hawkish Sentiment Hits Near Three-Year High
nashnova research
All 35 economists surveyed by Bloomberg expect the Bank of England to hike rates by 25 basis points to 4% on Thursday — its first increase since 2023 — yet the BOE's own chief economist has openly doubted the market-priced 5% peak.
How certain is this rate hike?
Bloomberg's Oct 29–30 survey: all 35 economists expect a 25-basis-point hike to 4%. Zero dissenters.
Nearly 60% forecast the Monetary Policy Committee will vote 7-to-2 in favour; another 24% expect 6-to-3. This means → the hike itself is not in question — the only debate is how many dissent.
For context, at the September meeting only three members voted to raise. In plain terms = the committee flipped from "a few want to hike" to "nearly everyone does" in two months.
Why did the BOE hold back until now?
The Fed, the ECB, and the BOJ have all raised rates at least once since the US–Iran war began. The common driver: surging energy prices.
The BOE stood pat, citing two reasons: ① UK rates were already above European peers when the war started; ② rising bond yields were already dampening demand.
But as the war drags on, energy costs are spilling into broader goods and services prices, and officials have turned markedly hawkish. This reflects a judgment that passive tightening is no longer enough.
How high could inflation go?
The BOE is expected to raise its inflation forecast to reflect a sharp jump in household energy prices taking effect next January.
Dennis Shen, lecturer at Berlin International School of Management, says UK inflation could top 4% in early next year — roughly double the BOE's 2% target.
This means → the hike is likely the start of a tightening cycle, not a one-off. In plain terms = prices are still accelerating, so one hike and done is not an option.
Markets price a 5% peak — does the BOE agree?
Markets currently price the base rate peaking at 5%. But chief economist Hugh Pill said last month he is "sceptical" of that level.
Pill had been the committee's most committed hawk. This means → if the most hawkish voice won't endorse 5%, the doves certainly won't either.
ING economist James Smith expects the BOE's forward guidance to be highly uncertain — hinting at further hikes but committing to nothing, with "everything dependent on the data."
Why are wage negotiations the key variable?
The eventual rate peak depends heavily on a new round of pay talks beginning in early 2027.
The BOE's top concern is "second-round effects" — energy prices push up wages, which push up product prices, creating a self-reinforcing inflation spiral. In plain terms = if workers demand higher pay to cover energy bills and firms pass those costs on, inflation feeds on itself.
So far, no clear spiral has formed: the BOE's own business survey shows firms expect future wage growth to be lower than last year's, and 71% of firms say the war will squeeze margins — most do not believe they can pass costs to consumers.
What should investors watch next?
Near term: Thursday's meeting minutes and Governor Andrew Bailey's press conference — any signal that rates are unlikely to reach the market-priced 5%.
Medium term: whether rising winter heating bills push workers to demand bigger pay rises.
This means → the early-2027 wage negotiations are the single most important signpost for where the hiking cycle ends. How far rates go is, ultimately, a wage story.
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