Bank of England will probably raise rates again in December, chief economist says

Huw Pill, the chief economist of the Bank of England, has said the central bank will probably need to raise interest rates next month, in December 2026, and again in early 2027 to combat rising inflation, according to The Guardian.

The Bank of England is the UK's central bank. The interest rate it sets affects how much it costs to borrow money across the economy, and inflation is the rate at which prices rise. The bank lifted its rate from 3.75% to 4% in early November 2026. Pill described that step as "significant", but said "we have further to go".

Pill said "we will see evidence that motivates further rises" in interest rates, and he indicated he was poised to vote for another quarter-point increase, meaning a quarter of a percentage point, in December. He said the bank would "do what is necessary to get inflation back to 2% through time".

Inflation is expected to rise to 5% in spring 2027, driven by high oil and gas prices linked to the Iran war. Pill said an end to the US-Israeli conflict with Iran, and a fall in energy prices, was a "very low probability".

Financial markets expect UK interest rates to rise to almost 5% in 2027. Pill said that expectation was "not outrageous". He also said the bank's "ability to be modest" in the size of its rate rises "has diminished", and that "we waited too long" to act against inflation.

The UK economy grew by 0.7% in the third quarter of 2026, covering July to September. Its annual growth rate was exceeded only by the United States among the Group of Seven (G7) large advanced economies.

Higher rates will also reach households directly. An estimated 2.3 million homeowners will have to refinance their mortgages in 2027, meaning they will need to take out new home loan deals to replace their current ones.