Bank of England tipped for more rate hikes as UK firms hire for the first time in 25 months
British businesses added staff in October for the first time in 25 months, and the Bank of England is now expected to answer with more than one interest rate rise. The S&P Global purchasing managers' index for the UK's private sector came in at 52.9 for October, with the dominant services sector climbing to 52.8 from 52.1 a month earlier, its fastest growth since February. Any reading above 50 signals expansion.
The hiring turn follows two years in which managers cut headcount to absorb higher taxes and salary costs, S&P Global said. Greater demand and fuller order books, including work tied to AI, supported the rebound, while input-cost inflation accelerated to its strongest since June.
Tim Moore, economics director at S&P Global, said the figures "underscore the near-certainty of a Bank of England rate hike in November" and "collectively raise the likelihood of further Bank of England policy tightening into 2027". Pantheon Macroeconomics said the price pressures and steady demand mean "all roads lead to multiple hikes over the coming months unless energy prices tank".
The Bank's Monetary Policy Committee is widely expected to lift Bank Rate to 4 per cent from 3.75 per cent. A shadow committee of economists voted 6-3 for a rise on inflation risk. Jack Meaning of Barclays, taking part independently of his employer, said the Bank must win "credibility" with the public as it tries to bring inflation back to 2 per cent.
The Bank forecasts inflation above 4 per cent in early 2027 and publishes revised projections for the economy, the jobs market and prices on Thursday. Inflation has sat at target for only a few months in the past five years; should it stay above 3 per cent, governor Andrew Bailey will have to write to Chancellor John Healey explaining the miss.
What it means for Pakistan: Higher Bank Rate feeds straight into Pakistan's cost of borrowing abroad: a stronger pound and firmer UK yields tend to lift the dollar, adding pressure on the rupee and on the State Bank of Pakistan's own rate path as it guards against imported inflation. British rate rises also raise the cost of any external financing Pakistan seeks from London markets, while Pakistani exporters selling textiles and other goods into the UK face softer British demand if tighter policy cools spending.
