Interest rate rises likely in coming months, Bank of England economist says

Bank of England chief economist Huw Pill says further interest rate rises are likely, potentially as soon as next month and again in early 2027, as the Bank seeks to bring inflation back to its 2% target. Higher borrowing costs could increase mortgage payments for an estimated 2.3 million homeowners refinancing next year.

The Bank raised its rate from 3.75% to 4% this month. Pill expects inflation to reach 5% in spring, partly because of higher oil and gas prices linked to the Iran war, and is concerned that pay rises could keep inflation elevated. Markets expect rates to approach 5% in 2027, though critics warn further rises could weigh on manufacturing, construction and household spending.