Back on Wall Street, the Dow Jones industrial average (DJIA) has slumped by 2.5%, or 1,346 points, as shares retreat sharply.

Both the S&P 500 share index and the tech-focused Nasdaq has hit their lowest levels since late July, and on track for their biggest one-day drop in five months.

Chip giant Nvidia is leading the selloff on the DJIA, down 8%, followed by Goldman Sachs which has dropped by 6.5%.

A December hike in UK interest rates is now “on the table”, argues consultancy Oxford Economics, following today’s rise.

Oxford Economics believes that December’s Monetary Policy Committee meeting “looks like a coin flip”, with oil and natural gas prices set to be the decisive factor.

Their chief UK economist Andrew Goodwin reckons the committee’s messaging was more hawkish than before.

“Higher energy futures prices and more evidence of domestic resilience both increase the risk of second-round effects emerging.

The degree of inflationary pressure already in the system means another hike in December or February is likely.”

America’s technology share index, the Nasdaq Composite, has fallen into correction territory.

The Nasdaq Composite is down 4% today, as tech stocks drop sharply, and is now more than 10% below its record closing high.

Oil and gas aren’t the only volatile elements in the markets today, following the events of the last 48 hours.

Over on Wall Street, Elon Musk’s businesses are being hit in the aftermath of the midterm election results.

Shares in Tesla and SpaceX are both down around 9% in early trading, adding to losses yesterday that wiped billions of dollars off both company’s valuation.

The midterms have been something of a disaster for Musk.

He contributed at least $446m to Republican-aligned Super Pacs and groups over the course of the elections, specifically targeting several key Senate races in an effort to help the Trump administration retain Republican control of Congress – and then watched the Democrats rack up a series of election wins.

Voters across the US also voted for bans or restrictions on datacentre development, in a backlash against AI.

Several economists are arguing that today’s rise in UK interest rates is not the start of a long cycle of rate hikes.

Sanjay Raja, Deutsche Bank’s chief UK economist, says today’s move is an “insurance policy” against the danger ofsecond-round effects (a wage-price spiral), arguing:

Today’s hike merely adds a dose of policy restriction to an already restrictive policy stance. Moreover, with financial conditions having tightened materially since March, the case to go much further isn’t as strong as it may have been in the Bank’s previous hiking cycle back in 2022.

With signs of second-round effects remaining minimal at this juncture, we retain our view for one more hike with Bank Rate peaking at 4.25%. And perhaps the bigger question from today’s decision is whether the next hike comes in December or February. There is a clear risk that the MPC could go earlier – this will be something to watch in the coming weeks and will likely be determined by forthcoming inflation outturns as well as developments in the Middle East (with the last 48 hours delivering some good news on energy price expectations).

Modupe Adegbembo, economist at investment bank Jefferies, believes another hike is likely, but not a foregone conclusion, telling clients:

February is our base case, but the MPC looks willing to pause if the backdrop improves materially.

A resolution to the conflict or a further meaningful stabilisation in energy prices would reduce the need for another move, particularly if second-round effects remain limited. So we think the bias is towards another hike in February, but it remains conditional on the energy shock and evidence of persistence.

Daniel Siluk, head of global short duration & liquidity at Janus Henderson Investors, is also cautious about interpreting today’s decision as the beginning of a prolonged hiking cycle.

The energy shock is lifting headline inflation, but there remains relatively limited evidence that it is becoming embedded in broader wages and prices. At the same time, higher energy bills, elevated mortgage rates and tighter financial conditions are increasingly weighing on household purchasing power and should ultimately slow demand. Andrew Bailey was careful to stress that today’s move should not be viewed as the first in a sequence of increases. Our view is that the Bank is effectively buying some insurance against second-round inflation effects and protecting its inflation-fighting credibility.

One further increase looks increasingly plausible, but the bigger question for markets is whether the considerably longer tightening cycle currently reflected in the curve will ultimately be delivered.

Q: You say the best thing that can happen is, is to resolve the conflict in the Middle East. Given the events of the last 48 hours, would you make that plea directly to US President Donald Trump or the Republican Party for the sake of the UK economy or global economy? (asks Hannah Brenton of Politico).

Andrew Bailey replies that prime minister Andy Burnham put this pont very clearly in the last 24 hours, speaking at the Commonwealth summit [where the PM said the midterm election results are an “opportunity” to focus on ending the Iran war].

Bailey says he supports Burnham on this issue, explaining:

I mean, he also made the same point about Russia’s illegal invasion of Ukraine.

This is absolutely critically important….

I’m very much speaking in the same vein and very much support what he said.

Q: Governor, you said before the budget that fiscal policy needed to be directed towards stability, and be seen by markets as credible – did the chancellor get the message?

Andrew Bailey bristles at the suggestion he was trying to influence John Healey’s first budget, saying:

I’m very careful what I say on fiscal policy. I said nothing on the budget whatsoever.

Bailey then deploys the BoE’s monetary policy remit in his defence, saying it gives the Bank the objective of supporting the economic policies of the government of the day, including the fiscal framework.

He insists, firmly:

I do support it. So there’s nothing more to it than that, really. It’s not a controversial thing to say at all. Really.

Q: The government has talked about wanting to open a new conversation about the UK’s future relationship with the European Union – Do you welcome that conversation? Do you expect to contribute to it? And is the Bank’s broad view that a closer relationship with the EU will be positive for growth? (my colleague Heather Stewart asks).

Andrew Bailey reminds the press conference that he has a long record of not taking a view on Brexit, per se.

But he then argues the merits of greater trade and openness, telling reporters:

I am in favour of trade and openness because it actually is a source of growth and economies. It is a source of productivity growth.

We learn this from Adam Smith and ever since and so, anything that is done to enhance and support the development of sustainable trade and openness is something I would encourage.

Q: is the Bank’s central scenario now for “two and done” when it comes to rate hikes?

Andrew Bailey declines to nail his trousers to the mast by giving this sort of guidance, saying:

I’m not going to sign up to the two and done point, for reasons you’ll understand.

But the governor does then point out that, in the minutes of this week’s meeting, he says that he can “see the argument” for another rate hike, unless there is news which softens the risks to inflationary pressures.

He tells today’s press conference:

As I said earlier, things have happened in the last 48 hours, but frankly, the whole situation is so volatile that you really don’t want to put much weight on on two days, which, you know, frankly, haven’t yet been backed by any firm evidence that there is a peace process, you know, which is going to lead to something concrete.

I mean, I’m sure we all hope it is. I certainly hope it is. but we need to see more evidence of that.

Andrew Bailey also points out that the Bank’s latest forecasts did not predict oil falling to $95 a barrel until May 2027 (a level it actually hit last night).

And that prompts the first question from the media, from the BBC’s Faisal Islam:

Q: Are you suggesting that had the fall in the crude oil price been included in your forecast that you may not even have done today’s rate rise?

“No”, Bailey replies, repeating his earlier point about how inflationary pressure are already heading down the pipeline (such as another jump in energy bills in January).

He explains that the most important factor for the path of interest rates is whether the UK experiences “second round effects” (where inflation creates a wage-price spiral).

Bailey declares:

I would be pretty confident in saying to you, I think, although it’s a hypothetical, obviously, that had we known what was going to happen in the last 48 hours, the decision would still be the same.

[Reminder: the Bank votes on interest rates the day before the decision is announced, based on forecasts drawn up in advance by its staff].

BoE governor Andrew Bailey then turns to the events of the last 48 hours – the US midterms, and the market reaction.

Bailey says the drop in energy prices is “positive news”, telling reporters:

The volatility, of course, has been evident in the last 48 hours. Wholesale, Brant Crude Oil and Natural UK natural gas prices are down around 15% since the start of the week, at $95 and 218p per therm, respectively.

But, Bailey also warns there is still “a significant amount of inflationary pressure in the pipeline”.

He points out that the “observation window” for the next rise in UK energy bills in January closes in less than a fortnight – so will be based, in part, on the high wholesale oil and gas prices of recent weeks.

Bailey says:

Now, of course, if we continue to get good news on the conflict, that will reduce the risk of further inflationary pressures building. Whilst the Ofgem cap for the first quarter of next year is largely now determined, we would, of course, in this case see lower pump prices.

So inflation would peak somewhat below 5%.

The Bank of England are holding a press conference to explain today’s interest rate decision.

Governor Andrew Bailey begins by pointing to the surge in oil prices caused by the Iran war, saying:

The conflict in the Middle East is now in its ninth month. It has led to further increases and volatility in global energy prices. Those elevated energy prices have caused inflation to rise in every G7 economy since February. That includes the UK.

You can watch the press conference here:

The Bank’s two most dovish policymakers – Alan Taylor, and Swati Dhingra – both voted for today’s hike, but are indicating they’d be reluctant to lift borrowing costs further.

Some economists had predicted that these two doves would have vooted to hold rates today.

Alan Taylor says today’s rate rise is ‘insurance’, rather than the start of a cycle of hikes.

In the minutes from this week’s meeting, he says:

It is essential to communicate, and for markets to understand, that, as of now, this is not the start of a hiking cycle: policy isn’t on a pre-set, unconditional path. The risk is curve dislocation and unwarranted tightening in financial conditions. Rather, from an already restrictive position, this is a risk-management ‘one-for-now’ insurance hike

Swati Dhingra also uses the ‘insurance’ word, explaining:

Raising Bank Rate by 25 basis points provides additional insurance against upside risks from stronger pass-through and firmer growth in demand.

To support maintaining Bank Rate at a higher level for an extended period, I would need to see clear evidence of a recovery in firms’ pricing power and households’ purchasing power alongside signs of mutually reinforcing wage and price pressures.

Today’s interest rate decision was taken by the nine members of the Bank’s monetary policy committee.

Eight of them – Andrew Bailey, Sarah Breeden, Swati Dhingra, Megan Greene, Clare Lombardelli, Huw Pill, Dave Ramsden and Alan Taylor – voted for the quarter-point rise.

The Bank says:

The duration and scale of the energy price increase had generated sufficient inflationary pressures in the pipeline to warrant an increase in Bank Rate. There was a range of views among these members about the extent to which the underlying disinflationary process prior to the conflict had continued, the degree of spare capacity in the economy, and the restrictiveness of the current monetary policy stance.

These members agreed that, although evidence of second-round effects had been limited, the availability of evidence would increase over time, and would continue to need close monitoring, along with the implications of developments in energy prices for medium-term inflationary risks.

The outlier was Catherine L Mann, who voted for a half-point rise in Bank rate.

Mann is concerned about the “non-linear inflation risks” facing the UK, and keen to stamp on higher wage demands.

She explains, in the minutes of the meeting,

Households are particularly attentive to energy and food price inflation, which may be reflected in 2027 wage demands. With CPI inflation at 3.5% in September, the economy has crossed the estimated statistical threshold into a high inflation-tight labour market regime where the asymmetric behavioural responses of households and firms support more robust second-round effects.

A different research approach estimates that the economy may well have breached the policy credibility threshold, which worsens the policy trade-off. Moreover, a substantial inflation risk premium is in the UK yield curve, reflecting five years of above-target inflation, where it has averaged 4.7%. Therefore, from a risk management and credibility perspective, a 50-basis point hike in Bank Rate is ‘good policy’.

The Bank of England is also warning that UK inflation is set to hit 5% by the middle of next year, as it explains why it raised interest rates today.

That would be a serious, painful acceleration in prices – inflation was clocked at 3.5% in September – hurting households who are already struggling under the cost of living crisis.

The Bank pins the blame on the Iran war saying:

The conflict in the Middle East is now in its ninth month. Global energy prices have continued to rise from an already elevated level. UK CPI inflation increased to 3.5% in September.

It is now expected to rise to around 5% by the middle of next year. It is then projected to fall as the impact of rising energy prices on 12-month inflation rates fades, and still restrictive monetary policy bears down on inflation.

Newsflash: The Bank of England has raised interest rates for the first time in more than three years, as policymakers try to fight rising inflation.

Its monetary policy committee has voted to raise Bank rate from 3.75% to 4%, the first rise since August 2023.

The move was widely expected by markets, as UK inflation recently hit 3.5%, further above the Bank’s 2% target.

Excitingly, one member – Catherine Mann – wanted a half-point hike!

The Bank says:

At its meeting ending on 4 November 2026, the Monetary Policy Committee (MPC) voted by a majority of 8–1 to increase Bank Rate by 0.25 percentage points, to 4%. One member voted to increase Bank Rate by 0.5 percentage points, to 4.25%.

Excitement is building, as the City prepares for the Bank of England’s latest interest decision to be announced at noon sharp.

A rate hike is nailed on, according to the money markets – they show that a quarter-point rise to 4%, from 3.75%, is a 99.96% chance.

That part of the decision, therefore, probably won’t be the important part of the story.

George Vessey at cross-border payments company Convera, explains:

With markets assigning around a 95% probability to such an outcome, attention instead turns to the vote split, updated forecasts and Governor Bailey’s guidance. Markets currently price almost 100bp of additional tightening through late 2027, a path that looks increasingly ambitious in our view. If the BoE pushes back against those expectations, the resulting dovish repricing in rates could prove more important for sterling than the hike itself.

Britain’s share index of medium-sized companies has hit a record high today.

The FTSE 250 index, which includes companies who are too small for the FTSE 100, has hit a new peak – it was up 1% or 261 points to a high of 25,176 points.

In the pharmaceutical world, AstraZeneca has reportedly made a $10bn offer to buy US biotech firm Rhythm.

According to the Wall Street Journal, AstraZeneca made an offer last month – a deal would allow it to expand its portfolio of rare disease treatments, as Rhythm ​develops therapies for rare neuroendocrine disorders.

Shares in Rhythm jumped yesterday afternoon after the WSJ said AstraZeneca had offered to pay $124 a share. This pushed Rhythm’s shares up by 28% to $110.68. They’re slightly lower (-3%) in pre-market trading.

AstraZeneca has declined to comment.

Oil markets sold off aggressively because the political power shift within the US could lead to “more scrutiny over the war, while funding it could become more difficult”, according to market analysts at Dutch bank ING.

“How all this plays out is still highly uncertain,” ING’s analysts added. “Therefore, the degree and speed to which the oil market has sold off seems to be overdone.”

Professor Brenda Shaffer, a senior fellow at the Atlantic Council Global Energy Center, told the Guardian that although the Democrats won support by galvanising the public opposition to rising energy costs they would struggle to address the crisis that helped the party to victory.

Shaffer said:

“They may blame the Republicans for the closure of the Strait of Hormuz, and continue to do so, but why would Iran compromise now?”

She added that the record high diesel prices in the US which have pushed up costs across the economy may also prove difficult to tackle if Democrats are unwilling to curtail Ukraine’s military attacks on energy infrastructure in Russia, one of the world’s biggest diesel exporters.

Donald Trump’s mid-term election defeat has caused Europe’s gas prices to tumble as global energy markets bet on a quicker than expected resolution to the strait of Hormuz crisis.

The market price for oil, gas and fuels across global markets plummeted after the US President conceded that the US-Israeli war on Iran had angered voters and caused his part to lose control of the House of Representatives and the Senate.

The admission triggered oil and gas prices to fall sharply as the election results emerged on the hope that the result may galvanise US efforts to end the conflict, which has disrupted energy supplies through the strait of Hormuz for over 8 months.

Europe’s gas benchmark fell to three week lows of €84.36 per megawatt hour on Thursday after climbing to a four year high of almost €104 per megawatt hour late last week as colder weather prompted companies to begin drawing from Europe’s historically low gas storage facilities.

Europe’s gas stores are only around 74% full, well below the five-year seasonal average of 90%. In Germany, Europe’s biggest economy and home to the EU’s largest gas stores, gas reserves stand at below 61%.

The gas market slump followed a sharp drop in the global oil benchmark, Brent crude, which fell 8.7% lower on Wednesday to below $95 a barrel, its lowest price in two months.

Newsflash: The pound has hit its highest level since its crash after the Brexit referendum a decade ago.

Data released by the Bank of England shows that the pound reached its strongest level against a basket of other currencies since 23 June 2016 – the day of the EU vote - yesterday.

This follows the drop in the value of the US dollar after the Midterm elections, but also reflects the pound’s recent strength against other currencies such as the euro and the yen.

The pound has also benefited from expectations that the BoE will raise interest rates at noon today, which makes it more lucrative for investors to hold funds in sterling.

The dollar weakened generally yesterday, amid a risk-on rally that saw money flow into other currencies.

Jim Reid of Deutsche Bank explains:

When it came to the market reaction, there was relief among investors that the results weren’t disputed, which helped to reduce political uncertainty. Moreover, the prospect of divided government also eased concerns about the fiscal trajectory, given it’ll now be more difficult to pass tax cuts or spending packages.

Today’s 10-year high relates to the sterling “effective exchange rate index” (EERI), which tracks the pound against a basket of other currencies.

Calculated by the Bank of England, this index has now hit 86.5372.

On the index, 100 equals the value of the pound in January 2005.

Back in 2016, the pound hit a 31-year low against the dollar. That pulled the EERI down to 84.441 on 24 June 2026, down from 87.9248 on the day of the referendum.

The EERI fell as low as 73.1 on March 23, 2020, in the Covid pandemic.

Ouch! Activity in the UK’s construction sector fell sharply last month, new data shows.

The latest Constrution PMI report, just relased, shows there was a “sharp and accelerated reduction in business activity during October”.

Housebuilding work slumped in the month, the report says:

Residential activity (index at 35.1) was by far the weakest performing segment, with the latest reading the lowest since December 2025 and indicative of a steep drop in house building.

Anecdotal evidence cited low consumer confidence, elevated risk aversion and headwinds from rising borrowing costs.

The overall Construction PMI, produced by S&P Global, has dropped to 43.6, down from 46.1 in September. That’s the lowest reading since June, and further below the 50-point mark showing stagnation.

Norway’s central bank has left interest rates on hold, but warned it could raise borrowing costs in the months ahead.

Norges Bank voted to maintain its policy rate at 4.5%, despite inflation continuing to run over its target.

Governor Ida Wolden Bache says:

“Inflation is too high. It will likely be necessary to keep the policy rate elevated for a time, and we are prepared to raise the policy rate if needed to bring inflation down to target within a reasonable time horizon.”

While financial markets are welcoming the US midterm results, there are still some key risks, cautions Ajith Nair, chief investment officer of Isio Investment Management.

Nair explains that the reduced political uncertainty is helpful for markets – but that doesn’t mean that all the major risks have disappeared":

“The immediate reaction has clearly been positive and provides some welcome respite after the recent wobble in AI-related stocks. Markets appear to be taking comfort from the idea that the election result means the Trump administration will face greater constraints in pursuing some of the more disruptive parts of its policy agenda over the final two years of the presidency.

“That may ultimately prove correct, but investors should be careful about getting too comfortable with that assumption. A more challenging Congress does not mean the President is powerless, particularly when it comes to trade and foreign policy. If markets are effectively betting on two relatively uneventful years from Washington, that assumption could still be tested.”

UK government bond prices are also rallying today.

This has pushed down the yield, or rate of return, on UK 10-year gilts by 4 basis points (0.04 of a percentage point) to the lowest since August 28, below 5.1%.

Thirty-year gilt yields have fallen too, to their lowest since July 7.

More succour for the Bank of England, and hard-pressed households!

Gas prices are dropping this morning, with the month-ahead UK gas price down 2% at 214.2p a therm.

That’s the fourth daily fall in a row, after prices hit their highest level in almost four years last week.

However, this still leaves wholesale gas prices more than double their level before the Iran war began.

Boom! The London stock market has hit a three-month high at the start of trading.

The blue-chip FTSE 100 share index has jumped by 119 points, to 10,948 points, as global stock markets continue to welcomed the strong win by the US Democrats in the Midterm elections.

That’s on top of Wednesday’s 190 point leap, and puts the Footsie close to the record high hit at the end of July.

It means the index has gained around 10% this year, having hit 10,000 points for the first time back in January.

European stock markets are also higher this morning, with France’s CAC 40 jumping by over 1%.

The Bank of England will be reassured to see that the oil price has tumbled this week.

Brent crude fell through the $100 a barrel mark yesterday, hitting its lowest level in two months, and this morning is trading around $95 a barrel.

Traders appear to be concluding that Donald Trump might try to deescalate the Middle East conflict after his Republican party was hammered in this week’s midterms.

Nothing is certain, though, as Kyle Rodda, senior financial market analyst at Capital.com, explains:

Peace talks are in rhetoric alone currently. Meanwhile, it’s feared an increasingly lame-duck President Trump could become more active (and arguably reckless) in foreign policy as he seeks to influence policy at a time when there are fewer self-interested reasons to show restraint.

For now, market participants are pricing out the geopolitical risk premium that had been baked into the market leading into the midterms on fears the US would launch fresh strikes after the election.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Predicting a central bank’s actions can be risky, but there will certainly be surprise in the City of London today if the Bank of England doesn’t raise interest rates at midday.

The BoE is widely expected to announce its first increase in UK interest rate in more than three years, at noon today. A quarter-point rise would take Bank Rate up to 4% from 3.75%.

With inflation rising faster than the Bank’s target, most of its policymakers are expected to decide now is the moment to tighten monetary policy. This, they might hope, would dampen the risk that high energy costs spill over and push up the cost of other goods and services.

The Bank hasn’t hiked borrowing costs since August 2023, when bank rate hit 5.25%.

It will also be playing ‘catch-up’ with other central banks – rates have already risen in the US, Japan, the eurozone, Australia and Canada this year.

Peder Beck-Friis, economist at bond trader PIMCO, says a hike to 4% is “fully priced by markets,” explaining:

The BoE is primarily responding to higher energy prices, but macro data have also turned more hawkish.

Growth has been resilient, the labour market has stabilized, and core inflation has edged higher. However, the economy does not look overheated, and pass-through from higher energy prices into core inflation has been modest overall.

Andrew Wishard, senior UK economist at Berenberg, predicts the decision will be almost unanimous:

We expect an 8-1 vote in favour of the move, with only Alan Taylor dissenting. Although several rate setters will vote for the hike reluctantly, developments in the real economy justify it. Strong economic growth and a tentative stabilisation of the labour market suggest that an interest rate hike will restrain economic activity only modestly.

The agenda

• 9am GMT: UK car sales report for October

• 9.30am GMT: UK construction PMI for October

• Noon GMT: Bank of England interest rate decision

• 12.30pm GMT: Bank of England press conference

• 1.30pm: US jobless claims report