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A rate rise is the right decision, but stop blaming Iran
The Bank of England unanimously raised its base rate from 3.75% to 4%, citing persistent inflation risks. The article argues that the vote reflects concern that higher energy costs could spread into wages and prices, and says the government should address domestic cost pressures rather than blame the war in Iran.
Inflation rose from 3.1% in August to 3.5% in September, largely because of fuel costs. The Bank’s forecast suggests inflation could reach 5% by mid-2027, while the OBR expects a peak of 3.75% early next year. Mortgage borrowers and businesses face higher costs, while savers may earn more interest; markets expect as many as four further quarter-point rises by the end of 2027.
In short
- The Bank raised rates to 4% in a unanimous vote.
- It fears energy costs could feed wider inflation.
- Borrowers and businesses face higher costs.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Supporters of the rise can argue that persistent inflation risks, especially the chance that energy costs feed into wages and prices, justify acting before inflation becomes entrenched. A modest increase may help keep expectations in check and protect the Bank’s credibility, even though it raises borrowing costs for households and businesses.
The case against
Critics can argue that a rate rise cannot reduce the underlying cost of fuel and may instead add pressure to mortgage holders and firms, potentially weakening demand and investment. With forecasts differing and inflation partly driven by external energy costs, they may favour waiting for clearer evidence that price rises are spreading before tightening further.
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