The Bank of England raised its key rate on Thursday, Nov. 5, to 4% from 3.75%. It's the first increase since the war with Iran drove oil prices up. Then it told markets to calm down. Investors had priced a climb to 5% by the end of next year. The bank sees one more move, to 4.25%, as likely.
Gov. Andrew Bailey put it plainly. The increase "shouldn't be seen as the first in an inevitable long sequence of hikes," he said. He also said it may not be the last unless the Middle East conflict ends. Oil and gas prices have stayed high since the war began in February. They have eased since Tuesday's election put Democrats in control of Congress. The paper says traders see a better chance of a settlement. The bank's new forecasts assume oil at $108 a barrel. On that path, U.K. inflation peaks at 4.9% in the second quarter of 2027. It gets back to the 2% target only in the third quarter of 2028. British home energy prices are set to jump in January. Mortgage rates there are already up a full percentage point since the war began, by the bank's own figures.
Back home, layoffs stay rare
In the U.S., the same day's data showed an economy still running warm. Jobless claims fell to 189,000 in the week through Oct. 31, the Labor Department said. Economists had expected 197,000. On Friday, by our own pull, the Labor Department said the economy added 165,000 jobs in October. Forecasters had looked for about 59,000 to 65,000. Unemployment was 4.1%, and hourly pay was up 3.1% from a year earlier. The Fed held its rate at 3.75% to 4% on Oct. 28 and meets again Dec. 9. By our own pull Friday morning, the prediction market Polymarket put the odds of a December increase at 78%. Those are crowd prices. They aren't forecasts.
Our read
This is a Fixed Income story, IN02 in our map. For a couple of years the story was that rates would fall. Thursday was a reminder that they can go the other way. Britain just did it. The U.S. jobs numbers give the Fed little reason to cut. Here's what a rate that can rise does to three things you may own. A CD ladder is a set of CDs that mature at different dates. One with short rungs rolls into higher yields. A single long CD locks you out of them. A money-market fund's yield tends to follow the Fed within weeks. A long bond fund loses price when rates climb. British government bonds fell, and mortgage rates rose a point, before the bank ever moved. Our books hold Treasury bills (SGOV) in 49 books and floating-rate paper (USFR) in 14, held at weight, nothing added. Floating-rate paper is Treasury debt whose interest resets with rates. Long bonds (TLT) sit in 4 older books, and we haven't added there either.
Your check this week is the maturity date on your cash. Pull up the CD or bond fund you hold and look at how long it runs. If you're retired and the next year or two of withdrawals sits in a five-year CD or a long bond fund, that money is tied to one bet on rates. Shorter paper rolls up with rates. Longer paper gets left behind. You don't re-roof the house in the storm. You do it the week before. If you'd like us to walk through the ladder with you, that's a planning review.