The Bank of England is expected to raise interest rates in November and February as stronger-than-expected UK economic growth reduces concerns that higher borrowing costs could undermine economic activity, according to economists at Pantheon Macroeconomics.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said the British economy is expanding significantly faster than policymakers had anticipated, strengthening the case for further monetary tightening.
The consultancy estimates that underlying UK economic growth has reached an annualised rate of 2.8% so far in 2026, suggesting economic activity remains robust despite inflationary pressures and elevated borrowing costs.
Wood argued that the economy should now be described as strong rather than merely resilient, with growth exceeding the Bank of England’s estimates of the UK’s sustainable economic capacity.
The current Bank Rate of 3.75% may no longer be sufficiently restrictive, he suggested, particularly as the economy continues expanding faster than members of the Monetary Policy Committee had expected.
Stronger growth could give policymakers greater scope to tackle inflation through additional interest rate increases without immediately threatening economic activity.
Pantheon Macroeconomics now expects two further interest rate rises, in November 2026 and February 2027, with the possibility of additional increases next year if energy prices remain elevated.
The outlook comes as policymakers assess the inflationary impact of higher energy costs alongside evidence of continued strength in the domestic economy.
For households and businesses, further increases would mean additional pressure on borrowing costs, particularly for mortgage holders approaching refinancing and companies reliant on variable-rate debt.
Financial markets will now focus on upcoming inflation, wage growth and employment figures for further indications of whether the Bank of England will move towards tighter monetary policy.
While Pantheon’s forecasts point towards consecutive rate increases, the decisions remain dependent on economic data and are not yet confirmed Bank of England policy.
