Client Update - 6th November 2026

The Bank of England (BoE) has raised interest rates for the first time in three years and warned of another increase to come to combat rising inflation unleashed by the Iran war.

Businesses have so far reported in the Bank’s surveys that they have been able to absorb the higher oil and gas prices – by hedging their energy costs, for example – but the Monetary Policy Committee (MPC) believes they will soon have to start passing higher prices on to consumers. Despite a rapid fall in the oil price this week as President Trump suffered disastrous mid-term elections, the BoE pressed on with the planned rate rise as they are also concerned about workers seeking to offset the impact of the higher cost of living, by bidding for bumper pay rises.

Speaking at the Bank’s press conference, Andrew Bailey welcomed the sharp fall in energy prices in the last 48 hours but said it would need to be sustained to change his view about the need for future rate rises. “This is positive news, but there is already a significant amount of inflationary pressure in the pipeline,” he said, adding: “What is the best thing that can happen? It is to resolve the conflict in the Middle East.” Thanks again Donald.

While the decision to increase rates was supported by all MPC members, the minutes of the meeting revealed divisions over how much further they may need to go to bring inflation under control. The dovish Alan Taylor suggested this should be a “risk-management ‘one-for-now’ insurance hike,” whilst Catherine Mann voted for a 0.5% rise as the bank suggested inflation could hit 5% next year and may not fall back to 2% until the third quarter of 2028.

European stocks are now ahead of their US peers this year performance wise, as tech wobbles have rattled Wall Street and the Democrats’ sweeping victory in the midterm elections has boosted hopes that President Trump’s erratic policymaking will be curtailed. Oil prices are lower on hopes that the scale of the Republican defeat would pile pressure on Donald Trump to end his war in Iran. Not that he has been one to think rationally.

Another reason non-US stocks have rebounded, is that a Democrat-led Congress may seek to reduce the impact of harmful global tariffs. Trump’s protectionist economic and foreign policies — from his sweeping tariff regime to his war with Iran — have hurt global economies, pushing up inflation and threatening to hit growth. Markets clearly believe that Democratic control on Capitol Hill could limit the chance of more policy shocks like these.

We have certainly seen a broadening out of the market away from technology as a result of the US mid-term elections and initial views are rather unsurprisingly that the Democrats are less likely to be supportive of Trumps MAGA trades (Make America Great Again) moving forwards.

The investment landscape has therefore evolved considerably over the past year. Expectations of falling interest rates and continued economic expansion have been challenged by geopolitical developments and persistent inflationary pressures.

Even so, the fundamental backdrop remains supportive. Economic growth continues, employment levels are generally healthy, and corporate profitability has remained resilient. While periods of volatility should be expected, we believe investors who maintain a disciplined, diversified, and long-term approach are likely to be best placed to achieve their financial objectives.

As always, we will continue to monitor developments closely. Do have a good weekend.