Lombardelli Leaves Door Open to Quarter-Point Rate Rise in December

Key Facts

Bank of England Deputy Governor Clare Lombardelli told The Guardian in an interview published on November 10 that another quarter-percentage-point increase could be justified as soon as the December meeting, and that she was not ruling it out. "But I am not ruling that out," she said. The remarks follow the bank's increase in the interest rate to 4%, putting the prospect of further monetary tightening on the agenda for the next meeting. Lombardelli described market pricing for another hike as close to even. "It is close to 50/50 for December," she said.

The Monetary Policy Committee voted by 8 to 1 to raise the rate by 0.25 percentage points to 4% after a meeting that ended on November 4, with the new rate taking effect on November 5. The decision provides the backdrop to debate over a December move, but does not settle its direction. Lombardelli said the next decision would depend on developments in the conflict, energy prices and broader economic data. She thus tied the possibility of a hike to the evolution of price pressures and the information available before the meeting. Her remarks do not rule out an increase, but present it as conditional on those developments.

The bank faces energy-related inflationary pressures: consumer price inflation rose from 2.6% in June to 3.5% in September 2026, with the Bank of England attributing part of the increase to energy and fuel prices. Bank staff forecast inflation would reach about 5% in the second quarter of 2027, as energy prices continue to rise because of the conflict in the Middle East. That trajectory makes energy costs a factor in monetary policy calculations over the coming months. By contrast, the bank said its central projections point to gross domestic product growth of 2.2% in 2026, slowing to 1.0% in 2027. The projections reflect slower growth alongside higher expected inflation.

In the labour market, Lombardelli said employers were delaying hiring and retaining workers, describing the situation as "low hiring, low firing dynamics." The unemployment rate stood at 4.7% in the three months from June to August 2026, according to data from the Office for National Statistics. Against this backdrop, The Guardian reported that the number of young people not in education, employment or training had risen to nearly one million. These indicators put the labour market among the factors to be considered alongside inflation and energy when assessing the next decision. Lombardelli's description reflects slower hiring while companies retain their employees.

Market expectations for a December hike rose after the November decision: a Bank of England report showed the probability priced at 50% after the decision, compared with about 30% beforehand. Michael Metcalfe of State Street said a committee member's vote for a larger increase and Governor Andrew Bailey's remarks about the possibility of further hikes if energy prices persist supported that pricing. "You have a dissenting vote calling for a bigger increase, and Bailey is making it very clear that further increases will be needed if energy prices persist," Metcalfe said. That assessment is consistent with Lombardelli's linking of the next decision to the path of energy prices, the conflict and the data. Market pricing remains a probability close to one-half, not a decision by the committee.

The Office for National Statistics is due to publish its first estimate of gross domestic product for the quarter from July to September, along with its monthly GDP estimate for September, on November 12 at 7:00 a.m. On the same date, it will release UK trade data for September, including the value of goods and services exports and imports. These releases will provide additional data ahead of the next Monetary Policy Committee meeting. The meeting will take place, and its decisions and minutes will be published, on December 17, 2026. The path of energy prices and developments in the conflict, alongside broader economic data, will be among the factors Lombardelli said would shape the decision.