Bank of England, Riksbank and RBA raise rates as Middle East energy shock persists

The Bank of England lifted Bank Rate to 4% and the Riksbank raised its policy rate to 2%, while Australian lenders pass on the RBA's 4.85% cash rate. The moves reverse the easing expectations that prevailed early in 2026.

What happened

The Bank of England's Monetary Policy Committee voted 8–1 on 4 November 2026 to raise Bank Rate by 25bp to 4%. [1] It pointed to inflation pressure still building within the economy, stemming from a Middle East conflict now in its ninth month and from rising global energy prices. [1] UK CPI was 3.5% in September and is projected to be near 5% by mid-2027 before easing. [1] Brent averaged $108/bbl and UK gas 216p/therm over the 15 days to 27 October, well above the assumptions made in July, and activity has been stronger than expected. [1]

On the same day the Riksbank raised its policy rate by 0.25 percentage points to 2 per cent, effective 11 November 2026. [2] It cited stronger economic activity and cost increases from supply disruptions linked to the Middle East war. [2] CPIF inflation was 1.5 per cent in September, while underlying inflation excluding temporary fiscal measures was about 3 per cent. [2] The Riksbank said further hikes are likely next year if the outlook holds. [2]

In Australia, the big four banks and Macquarie raised variable home loan and savings pricing after the RBA lifted the cash rate to 4.85%, an 18-year high and the fifth hike of 2026. [3] Most majors add 0.25% from mid-November, and ANZ cites about $79 more per month on a $500,000 owner-occupier P&I loan. [3] Governor Michele Bullock linked the move to persistent inflation and warned that households may feel poorer and spend less. [3]

FinUties' news monitor logged 19 reports on this story from 8 outlets in recent days, and 98 earlier related reports going back to 2025-12-12.

How we got here

At the start of 2026 the Bank of England was still debating cuts. On 5 February it held Bank Rate at 3.75%, with the MPC voting 5–4 to stand pat. [4] Forecasters including Berenberg and Oxford Economics still expected further cuts in 2026, though they had pushed the timing toward late April. [4]

The picture changed with the Middle East conflict, which Governor Andrew Bailey said began in late February. [5] By 23 March Brent was above $100/bbl, and a UK Labour peer was calling for a temporary cap on energy company profits. [6] On 7 April, strikes on Iran's Kharg Island pushed WTI to $115.8/bbl, the highest since April 2008, with constrained flows through the Strait of Hormuz adding to supply risk. [7]

Central bankers quickly framed the policy dilemma. On 22 April Riksbank Governor Erik Thedéen warned that supply shocks constrain output while raising inflation, forcing a choice between supporting demand and controlling prices. [8] He added that even a rapid resolution of the Hormuz crisis would leave inflation and energy costs elevated. [8] On 10 June he was focused on liquidity, urging banks to test their borrowing from the Riksbank as it reduces its Swedish securities holdings. [9]

The Bank of England held again at 3.75% at its meeting ending 29 July. [10] CPI had fallen to 2.6% but was expected to rise as higher energy prices passed through, and members saw an upside skew to inflation risks. [10] On 17 September Bailey noted that the Fed and ECB had recently raised rates while the MPC held. [5] He said mortgage rates had risen nearly 1% since late February, which amounted to effective tightening, and he pushed back on market pricing of four hikes next year. [5] A week later Deputy Governor Clare Lombardelli said CPI inflation was 3.1%, with projections reaching 4.2% by Q1 2027. [11] She said indirect pass-through had been weaker than anticipated and that the key risk was second-round effects through wages and domestically set prices. [11]

By late October the Bank's Agents reported pay settlements averaging around 3.6% in 2026 with similar expectations for 2027. [12] They also reported that energy input costs were outweighing weak, price-sensitive demand, and that contacts expected food inflation of 3%–4% by year-end. [12] On 20 October, oil was reported at $109+/barrel with the Strait of Hormuz closed. [13]

What changed in November is that the UK committee moved from holding to tightening, and the vote was lopsided rather than split. [1][4]

Why it matters for markets

The hikes could keep funding costs elevated for households and lenders. In Australia the pass-through to mortgage and savings pricing is already scheduled, and the RBA governor has said households may spend less. [3] In the UK, Bailey had already described rising mortgage rates as a tightening channel before the latest move. [5]

Energy prices are the main transmission channel. Brent at $108/bbl and UK gas at 216p/therm sit well above July assumptions, so continued high prices could keep inflation projections elevated. [1] The Riksbank's reference to cost increases from supply disruptions points the same way. [2]

Rates markets have already moved. The US 10-year Treasury yield was 4.95% on 3 November, versus 5.27% on 6 October. [14] The 2-year yield was 4.61%, versus 4.79%. [15] Whether that decline reflects expectations for policy or other factors is not yet known.

The central banks are not moving in lockstep. Sweden's headline CPIF of 1.5 per cent is far below UK CPI of 3.5%, and the Riksbank pointed to underlying inflation of about 3 per cent. [1][2] Differences in how inflation is measured and in the pace of hikes could affect relative currency and yield moves, though the available data do not show a clear shift. The euro was at 1.1259 dollars on 2 October and the yen at 157.47 per dollar on 30 October, versus 157.81 on 2 October. [16][17]

What to watch

• Energy prices. Bailey's stated condition for cuts is an end to the conflict and a return of energy prices to pre-conflict levels. [5]
• Second-round effects. Lombardelli named wage expectations and domestically set prices as the critical risk. [11] Pay settlements around 3.6% are one marker. [12]
• Riksbank in mid-December. Thedéen said October Flash-CPI inflation came in significantly below the September forecast, ahead of the mid-December policy decision. [18] It is not yet known how that will weigh against the Riksbank's signal of further hikes next year. [2][18]
• Policy debate at the ECB. Isabel Schnabel argued that central banks should respond to shocks according to projected inflation rather than labels, and should weigh overlapping geopolitical-energy shocks. [19] She also noted the ongoing wind-down of APP and PEPP holdings. [19]
• Australian pass-through. Most majors add 0.25% from mid-November, so the effect on household spending should become clearer after that. [3]
• Market pricing. Bailey disputed pricing of four hikes next year, so UK rate expectations remain an open question. [5]

Sources

1. News: Bank rate increased to 4% - November 2026 Monetary Policy Summary and Minutes, 05 Nov 2026
2. Press releases from Sveriges Riksbank: Policy rate raised to 2 per cent, 04 Nov 2026
3. Top Stories: Australian banks lift interest rates, 04 Nov 2026
4. US Top News and Analysis: Bank of England holds rates for now — so when's the next cut coming?, 05 Feb 2026
5. News: Transcript of the Governor's pooled broadcast interview given on 17 September 2026, 17 Sep 2026
6. Oilprice.com: UK Faces Calls for Temporary Cap on Energy Company Profits, 23 Mar 2026
7. Oilprice.com: WTI Crude Oil Hits $115 as Strikes Target Iran's Kharg Island, 07 Apr 2026
8. Speeches from Sveriges Riksbank: Thedéen: Difficult monetary policy trade-off in the event of supply shocks, 22 Apr 2026
9. Speeches from Sveriges Riksbank: Erik Thedéen: The banks should regularly test their operational capacity to borrow from the Riksbank, 10 Jun 2026
10. News: Bank Rate maintained at 3.75% - July 2026 Monetary Policy Summary and Minutes, 30 Jul 2026
11. Speeches: The outlook for inflation − speech by Clare Lombardelli, 24 Sep 2026
12. Publications: Agents' summary of business conditions - October 2026, 30 Oct 2026
13. Al Jazeera: Lavrov backs Tehran, but does Russia also gain from the US-Iran crisis?, 20 Oct 2026
14. Federal Reserve H.15: US 10-year Treasury yield (H.15), 03 Nov 2026
15. Federal Reserve H.15: US 2-year Treasury yield (H.15), 03 Nov 2026
16. FRED (Federal Reserve Bank of St. Louis): US dollars per euro (FRED DEXUSEU), 02 Oct 2026
17. FRED (Federal Reserve Bank of St. Louis): Japanese yen per US dollar (FRED DEXJPUS), 30 Oct 2026
18. Speeches from Sveriges Riksbank: Erik Thedéen: Simplify banking regulations – without compromising resilience, 05 Nov 2026
19. ECB: Isabel Schnabel: Navigating stormy waters: reflections on monetary policy, 05 Nov 2026

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FinUties generates this briefing for transparency. Published after editorial review. It may summarize source data and does not provide investment recommendations. Data availability at one timestamp does not guarantee future continuity.

Provenance

• Study: event-desk-20261105-bank-of-england-riksbank-and-rba-raise-rates-as-middle-east (92f2618c-8da6-4f7d-ad3e-a2c042ba7618)
• Author: FinUties Research
• Approved by: FinUties Research at 2026-11-05T22:55:01.634528Z
• Kind: event brief (news sources, not a FinUties dataset study)
• Cited sources: 19 from 9 outlets, all licensed for public use

• Earlier related events cited from 2026-02-05

• Manifest: /api/v1/research/studies/event-desk-20261105-bank-of-england-riksbank-and-rba-raise-rates-as-middle-east/manifest

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