Bank of England hikes for the first time since the Iran war, lifting interest rate to 4%

A person shields themselves from the rain while walking near the Bank of England building on the day the Monetary Policy Committee lowered interest rates, in London, Britain, Dec.18, 2025. Toby Melville | Reuters

The Bank of England announced its first interest rate hike in over three years on Thursday, as it raised its key rate by 25 basis points to 4%.

The widely anticipated move marked the bank's first hike since Aug. 2023, and made it the last major central bank to embark on a tightening cycle since the U.S. and Israel went to war with Iran eight months ago.

Ahead of the decision being announced, markets had been pricing in more than a 99% chance of a rate hike, according to LSEG data. Traders were also pricing in a one-in-four chance of a further hike in December.

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