London, April 30, 2026, 11:03 BST
- Oil’s rally has traders betting on close to three Bank of England rate hikes before December.
- Bank of England is still broadly seen holding Bank Rate steady at 3.75% today.
- Markets may focus less on the rate hold than on the vote split—or any hint of an inflation warning.
Investors have piled back into Bank of England rate-hike wagers, now factoring in nearly three quarter-point moves by year-end as oil prices spike on the Iran war, just ahead of the UK central bank’s policy call.
That’s the pivot. Where traders once expected the BoE to hold—or perhaps even cut—this year, fresh worries over energy costs are shifting the debate. Now, the question is whether policymakers will be pushed to keep rates elevated, or even bump them up once more.
The Monetary Policy Committee looks set to hold Bank Rate steady at 3.75% when it announces its decision at noon. Traders are tuned in not just for the outcome, but for any hawkish hints in the statement or the vote breakdown. According to the Financial Times, markets have largely priced in no change, pointing to earlier signals from policymakers.
Traders in interest-rate futures on Wednesday were betting on roughly 75 basis points of hikes by December, according to Reuters. That’s three typical quarter-point moves—each basis point is 0.01 percentage point. Markets have already baked in a July start for the first increase.
Oil was the main drag. Brent crude spiked to $126.41 per barrel on Thursday, reaching levels last seen in March 2022. Traders cited the virtual shutdown of the Strait of Hormuz—fueling persistent supply concerns. About 20% of both global oil and liquefied natural gas shipments move through the strait, according to Reuters.
This carries extra weight for Britain, where natural gas is a key pillar. Steeper energy costs filter straight into what households pay, squeeze company margins, and push up inflation expectations. According to the BoE, Bank Rate stands at 3.75%, inflation is running at 3.3%—still above the 2% target—and the Middle East conflict has only added pressure to energy prices.
“Rising crude prices have produced an immediate response in frisky fixed income markets,” said Neil Wilson, strategist at Saxo UK, speaking to Reuters. He sees the BoE “walking a tightrope” and doesn’t anticipate any policy move today—though he’s looking for up to two hawkish dissenters. Reuters
UK gilts have come under pressure. On Wednesday, ten-year gilt yields finished at their highest mark since July 2008. Long-dated 20- and 30-year yields pushed up to levels not seen since the middle of 1998. As for two-year gilts, yields rose roughly 11 basis points to settle at 4.56%, reflecting moves in rate expectations.
Before the decision, sterling edged up 0.1% to $1.3488 versus the dollar and hovered near unchanged at 86.63 pence per euro. Early Thursday, money markets were still factoring in about two rate hikes by year-end, despite the BoE’s cautious messaging.
Kallum Pickering, chief economist and deputy head of research at Peel Hunt, sees the Bank of England keeping rates unchanged over the summer, with a potential cut not lined up until late 2026 as inflation cools. Rate hikes, he noted, would be on the table only if inflation “were genuinely to spiral out of control,” which he does not expect. Reuters
The BoE isn’t the only one standing pat. Over in the U.S., the Federal Reserve left its benchmark rate unchanged at 3.50% to 3.75% on Wednesday, marking its most divided vote since 1992. Sticky inflation and the Iran war continue to muddy the picture. The European Central Bank is widely expected to keep rates steady as well later Thursday, with euro zone inflation ticking up to 3.0%.
The BoE faces a tricky spot. Rising oil could feed through to companies, then wages, then prices—potentially pushing the Bank into hiking rates despite slowing growth. But should the oil shock lose steam, or if pricier energy bills drag down consumer spending, markets may have overestimated the need for tightening.
Expect a hold for now. The real battle? It’s all about the message.
