Sterling advanced against the U.S. dollar Monday ahead of the Bank of England’s Nov. 5 rate decision, after policymakers split over interest rates and cited energy prices as an inflation risk.
FXStreet reported GBP/USD near 1.3430, up 0.3%, at 3:45 a.m. ET (08:45 UTC). Reuters had previously reported sterling at $1.3350 after the Oct. 20 U.K. jobs report, which EconoTimes covered in an earlier account of the pound’s reaction.
At its meeting ending Sept. 16, the BoE’s Monetary Policy Committee held Bank Rate at 3.75% in a 6-3 vote. The three members who dissented favored raising it by 0.25 percentage point to 4%.
ING Global Head of Markets and Regional Head of Research for UK & CEE Chris Turner said energy costs and expectations of a rate increase had supported sterling. He expects a 0.25-percentage-point increase Thursday and said it “looks like a done deal.” That is ING’s forecast; the BoE has not announced its decision.
The BoE’s September minutes said inflation was 3.1% in August. Based on energy prices at the close of business Sept. 14, the minutes said inflation was expected to reach about 3.75% in the fourth quarter of 2026. The committee said the size and duration of the energy shock, and whether it passes through to wages and prices, would affect its policy response. Monetary Policy Committee member Clare Lombardelli said the case for raising rates would strengthen if the conflict continued without a lasting resolution.
The minutes said higher short-term market rates had passed through to lending rates for households and businesses. The quoted rate on two-year fixed-rate mortgages was about 0.95 percentage point higher than before the Middle East conflict. The minutes also cited the final increase in the 2022-23 tightening cycle, when inflation stood at 6.8%, as a historical comparison.
The BoE is scheduled to announce its decision and publish a Monetary Policy Report on Nov. 5.
