British Pound broadly steady against Euro following BoE rate rise to 4.00%

EUR/GBP stays close to multi-month lows as the BoE delivers a widely anticipated rate increase.
In its first rate increase since 2023, the BoE lifts interest rates to 4.00%.
With inflation forecast to hit around 5% by mid-2027, Governor Bailey signals that further tightening remains possible.

A muted market response to the Bank of England’s (BoE) already priced-in rate increase leaves the British Pound (GBP) without a clear direction against the Euro (EUR) on Thursday. EUR/GBP is trading at around 0.8331 at the time of writing, a modest daily decline of 0.05%, keeping the pair close to levels last recorded in April 2025.

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An 8-1 vote by the Monetary Policy Committee (MPC) saw the BoE lift its benchmark interest rate by 25 basis points (bps) to 4.00% on Thursday. Catherine Mann, an external MPC member, preferred a bigger increase of 50 bps, which would have taken the rate to 4.25%.

With this first rate increase since 2023, the BoE joins other major central banks in tightening monetary policy to curb inflation fuelled by rising energy costs arising from the war in the Middle East.

Behind the decision are mounting concerns that a protracted conflict could leave inflation elevated for longer. Having climbed to 3.5% in September, UK Consumer Price Index (CPI) inflation is now forecast to reach around 5% by the middle of 2027.

Policymakers concluded that “the degree of inflationary pressure in the pipeline is now sufficient to warrant an increase in Bank Rate.” That assessment came despite limited evidence so far of higher energy costs passing through to broader prices and wages. Economic activity that exceeded expectations further strengthened the case for tighter monetary policy.

Unless inflation risks subside, Governor Andrew Bailey indicated that he would remain open to a further rate increase. Bailey said: “Without news which softens the risks to inflationary pressures, I can see the argument for a further increase in rates,” while Chief Economist Huw Pill also argued that one 25 bps increase was unlikely to be enough.

Even so, future decisions will hinge on energy prices and their transmission to wages, broader prices and economic activity, with the MPC emphasising that “monetary policy is not on a pre-set path,”. To bring CPI inflation back to its 2% target over the medium term, the Committee said it would adjust Bank Rate as required.

How Is Pound Sterling Performing Today?

Against the major currencies listed below, the British Pound (GBP) recorded its strongest performance today against the Swiss Franc. The table sets out its percentage change against each currency.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.12%	0.09%	0.03%	0.10%	0.14%	0.06%	0.19%
EUR	-0.12%		-0.03%	-0.09%	-0.02%	0.02%	-0.06%	0.06%
GBP	-0.09%	0.03%		-0.06%	0.00%	0.04%	-0.03%	0.08%
JPY	-0.03%	0.09%	0.06%		0.07%	0.11%	0.00%	0.15%
CAD	-0.10%	0.02%	-0.01%	-0.07%		0.04%	-0.05%	0.08%
AUD	-0.14%	-0.02%	-0.04%	-0.11%	-0.04%		-0.06%	0.04%
NZD	-0.06%	0.06%	0.03%	-0.01%	0.05%	0.06%		0.15%
CHF	-0.19%	-0.06%	-0.08%	-0.15%	-0.08%	-0.04%	-0.15%

Percentage movements between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. For instance, selecting the British Pound on the left and following that row across to the US Dollar gives the percentage change for GBP (base)/USD (quote) in the intersecting cell.