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Bank of America Global Research expects the Bank of England to raise interest rates by 25 basis points in both November 2026 and February 2027. The forecast places BofA alongside J.P. Morgan, Barclays, and UBS, all of which have projected a similar path for the BOE as persistent inflation risks cloud the UK’s economic outlook.
Markets appear to agree, at least partially. LSEG data shows a 63% probability priced in for a BOE rate hike at the November 2026 meeting.
A forecast that keeps shifting
The current call is notable because BofA itself abandoned rate hike predictions just months ago. Back on June 25, the bank revised its 2026 BOE outlook, scrapping its earlier projection for two hikes and instead forecasting that the central bank would hold rates steady at 3.75% for all of 2026. At that point, BofA saw only a single 25-basis-point cut arriving in November 2027.
The June revision made sense in context. UK inflation had come in at 2.8% in May, below economists’ expectations heading into the BOE’s June meeting. Energy prices were declining.
But the story changed over the summer. By mid-September 2026, the inflation picture had shifted enough that major brokerages started penciling in hikes again. J.P. Morgan, Barclays, and UBS all moved to forecast BOE rate increases in November 2026 and February 2027, driven by concerns that inflation could push past 4% in early 2027.
BofA appears to have circled back to a similar view, though it has characterized any potential 2026 hike as a “close call.” The bank frames possible tightening as precautionary, aimed at heading off a resurgence in inflation rather than signaling the start of a sustained tightening cycle.
Why the BOE might pull the trigger
While 2.8% in May was manageable, sitting above the BOE’s 2% target, the risk that prices could accelerate toward 4% early next year changes the calculus entirely.
Geopolitical tensions arising from the Middle East have added another layer of uncertainty, as energy price shocks from that region have historically been one of the fastest channels through which inflation expectations can shift.
For context, the BOE had been on a gradual easing path earlier in 2026, bringing rates down to 3.75%. Reversing course to raise them again would be a meaningful policy U-turn.
What diverging forecasts tell us
The gap between BofA’s June view and its current stance illustrates just how uncertain the UK monetary policy landscape has become. In the span of roughly three months, the same research team went from “no hikes in 2026, one cut in late 2027” to forecasting two consecutive hikes before early 2027.
For currency markets, two 25-basis-point hikes would push the BOE’s policy rate to 4.25%. Bond traders have already begun repositioning, as the 63% probability of a November hike means gilt yields have likely adjusted to reflect much of the expected move.
The February 2027 meeting adds another variable. Even if November delivers a hike, the second move is far from guaranteed, as three months of economic data between the two meetings could easily shift the calculus, particularly if inflation moderates or the global economy weakens.
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