BoE Hikes to 4%, Construction PMI Slumps

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BoE Hikes to 4%, Construction PMI Slumps

43.60 S&P Global Construction4 BoE Interest Rate Decision0 BoE MPC Vote Cut9 BoE MPC Vote Hike0 BoE MPC Vote Unchanged

FTSE 10010,782.66-0.43%

GBP/USD1.34-0.39%

UK 10Y Gilt5.23%+5 bp

Brent Crude99.75+1.49%

Market Snapshot

Asset	Level	Change
FTSE 100	10,782.66	-0.43%
FTSE 250	24,702.00	-0.86%
GBP/USD	1.34	-0.39%
GBP/EUR	1.20	-0.07%
GBP/JPY	211.81	-0.75%
Brent Crude	99.75	+1.49%
Gold	4,056.30	-1.39%
UK Nat Gas	2.98	+1.22%
Bitcoin	75,525.56	-6.07%
UK 2Y Gilt	4.58%	-6 bp
UK 10Y Gilt	5.23%	+5 bp

Prior Economic Events

Data	Prior	Cons	Actual
S&P Global Construction PMI	46.10	46.10	43.60
BoE Interest Rate Decision	3.75	4	4
BoE MPC Vote Cut	0	-	0
BoE MPC Vote Hike	3	-	9
BoE MPC Vote Unchanged	6	-	0
BoE Monetary Policy Report	-	-	-
MPC Meeting Minutes	-	-	-

Today's Economic Events

Data	Prior	Cons	Time
Lloyds House Price Index Month-over-Month	0	0.10	02:00
Lloyds House Price Index Year-over-Year	0	-0.30	02:00
BoE Pill Speech	-	-	07:15

BoE raises Bank Rate to 4.00% in a unanimous 9-0 vote, first hike since 2023, signals more to come
UK Construction PMI collapses to 43.6 vs 46.1 consensus, sharpest contraction in over a year
Gilt curve twists: 10Y +5bp to 5.23%, 2Y -6bp to 4.58% as markets price peak rates

Yesterday's Recap

The Bank of England delivered a widely anticipated but hawkish 25bp hike, lifting Bank Rate to 4.00% with all nine MPC members voting for the increase — a unanimous split that removes any dovish dissent from the committee. The accompanying Monetary Policy Report projected CPI peaking near 5% next year, underpinning guidance that further tightening is likely. Sterling initially firmed on the unanimous vote but reversed to close down 0.39% at 1.34 against the dollar, suggesting the hike was fully priced and the guidance offered little incremental support.

Gilts twisted: the 2-year yield fell 6bp to 4.58% while the 10-year rose 5bp to 5.23%, a curve dynamic consistent with markets pricing a near-term peak in Bank Rate alongside elevated long-run inflation risk. The S&P Global Construction PMI printed 43.6 against a 46.1 consensus and prior, a stark contraction highlighting the toll of higher borrowing costs on the housing and commercial build sectors. Equities softened, with the FTSE 100 down 0.43% to 10,782.66 and the domestically-focused FTSE 250 off 0.86% to 24,702.00, the mid-cap index underperforming as rate-sensitive names bore the brunt.

The Day Ahead

Attention turns to the Lloyds House Price Index, with month-over-month consensus at 0.1% following a flat prior, and year-over-year expected at -0.3% — a soft print would reinforce the construction weakness and sharpen the narrative of a cooling housing market under rate pressure. BoE Chief Economist Huw Pill speaks at 07:15 ET, a high-impact event given his recent hawkish commentary; markets will parse his remarks for the pace and terminal level of further hikes following the unanimous vote. With no major tier-one data beyond these releases, price action will likely be driven by Pill's tone and gilt supply dynamics.

Sterling crosses remain the key transmission channel, with GBP/JPY down 0.75% to 211.81 reflecting broad risk-off. Traders should watch whether the 2s10s gilt curve steepens further as the market digests the "more likely" guidance.

Other Economic Notes

The unanimous vote and explicit warning that further hikes are likely mark a decisive shift in the BoE's reaction function, prioritising inflation control over growth support even as activity data deteriorate. ↓ p.2

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Other Economic Notes (continued)

The construction PMI at 43.6 is a clear signal that the most rate-sensitive sectors are already contracting, raising questions about the durability of the labour market at 4.70% unemployment. With CPI at 3.50% and the Bank projecting a 5% peak, real rates remain negative, justifying the committee's hawkish stance. The divergence between soft activity surveys and sticky inflation creates a stagflationary backdrop that complicates the forward path.

Betfred's withdrawal from Derby sponsorship, citing Budget tax hikes, is an early anecdotal sign of corporate belt-tightening.

Global Macro News

Global markets remain unsettled by the prospect of prolonged tight monetary policy, with Bitcoin down 6.07% to 75,525.56 reflecting a broad de-risking across speculative assets. Brent crude rose 1.49% to 99.75, keeping energy costs elevated and complicating the inflation outlook for import-dependent economies like the UK. Gold fell 1.39% to 4,056.30 as real yields firmed.

US midterm results are reshaping the political landscape, with tariff policy and minimum-wage debates dominating; Illinois Governor Pritzker called a federal minimum-wage hike an "easy way" for Democrats to open the new Congress. Egypt and the US signed a $625m framework agreement, while Turkey ratified the Mecca defence pact with Saudi Arabia. For the UK, a firmer dollar and softer risk appetite argue for continued sterling vulnerability, particularly against the yen and dollar.

Continuation

BoE Watch

The MPC's decision to raise Bank Rate to 4.00% on 5 November was unanimous, with all nine members voting for the hike and none for hold or cut — a striking consolidation of hawkish intent. The November Monetary Policy Report forecasts CPI peaking at around 5% next year, and the committee's statement explicitly warns that further increases are "likely," language that markets read as pre-commitment to at least one more hike. Governor Bailey signalled another rise in the near future, and Huw Pill's remarks today will be scrutinised for the terminal rate.

The Bank also flagged that AI is barely boosting productivity, a structural headwind that argues against rapid disinflation. On quantitative tightening, the stance remains restrictive, reinforcing upward pressure on long-dated gilt yields — consistent with the 10-year rising 5bp to 5.23%. For markets, the message is clear: the BoE is prioritising credibility on inflation over growth, implying a higher-for-longer curve and continued pressure on rate-sensitive UK equities and housing.

UK Macro Daily(Beta Mode)