BoE hikes rate for first time in 3 years; retreating oil prices may allow for more options ahead

LONDON (AP) — The Bank of England indicated Thursday that the sharp decline in energy prices after the U.S. midterm elections — if sustained — could limit the prospect of further interest rate hikes in the coming months.

After raising its main interest rate for the first time in more than three years to 4% from 3.75%, the bank said the outlook for U.K. borrowing costs largely hinges on what happens with the Iran war.

“We’ve seen encouraging news in the past 48 hours," Bank Gov. Andrew Bailey said at a press briefing following the first interest rate hike since August 2023. “The best thing that can happen is to resolve the conflict in the Middle East; there’s no question about it.”

The heavy losses suffered by the Republican Party in the U.S. midterm elections have been followed by a sharp drop in energy prices. Many believe that it’s now less likely that U.S. President Donald Trump will launch fresh strikes on Iran, with Democrats gaining control of Congress early next year following their big wins this week. Many Republicans, including Vice President JD Vance on Wednesday, blamed the war for the party’s poor performance at the ballot box.

Though Brent crude is down around $15 a barrel this week, trading at $96, that is still more than $30 more expensive than it was at this time last year.

If the decline in oil and gas prices is sustained over the coming weeks, then the expected peak in inflation next summer — which the bank anticipates will reach 5% — could be lower. That could temper the need for future rate hikes, and not just by the Bank of England.

Other central banks, including the U.S. Federal Reserve and the European Central Bank, have raised rates recently in response to the higher inflation stoked by the Iran war, and their interest rate strategies are largely contingent on what happens to energy prices.

Bailey said Thursday's hike “shouldn’t be seen as the first in an inevitable long sequence of hikes” but stressed that the outlook depends on what happens in the war with Iran.

“Unless the conflict in the Middle East is resolved, neither does it seem likely to be the last increase,” he said.

For hard-pressed households facing higher mortgage rates and businesses paying more to access capital, the hope is that Thursday’s rate hike will be the last for some time.

“The path for interest rates is hanging in the balance, with U.S.-Iran hostilities holding the key," said Suren Thiru, ICAEW's chief economist.

The decision to raise interest rates was unanimous given the pickup in inflation this year, though one of the nine members of the Monetary Policy Committee backed an even bigger increase, to 4.25%.

The pressure on rate-setters has grown steadily in recent months. When inflation hit an 11-month high of 3.5% in September — well above the bank's 2% target — it cemented market expectations of a rate hike this month, with potentially more to come in 2027.

The main cause of the spike in inflation this year has been the sharp rise in fuel costs resulting from the Iran war and the ensuing bottlenecks in the Strait of Hormuz, which have squeezed global oil and gas supplies and pushed prices at the pump and household energy bills higher.

“There is now enough inflationary pressure in the pipeline caused by the rise in energy prices that an increase in Bank rate is warranted," Bailey said.

Interest rates in the U.K. had been trending downward from a 15-year high of 5.25% until the U.S. and Israel attacked Iran.

Governor of the Bank of England, Andrew Bailey, second left, attends the Bank of England Monetary Policy Report press conference, alongside Deputy Governor for monetary policy of the Bank of England, Clare Lombardelli, left, Head of Media and Stakeholder Engagement at Bank of England, Katie Martin, second right, and Deputy Governor of the Bank of England for Markets and Banking, Dave Ramsden, right, at the Bank Of England in London, Thursday, Nov. 5, 2026. (Alishia Abodunde/Pool Photo via AP)

Governor of the Bank of England, Andrew Bailey, attends the Bank of England Monetary Policy Report press conference at the Bank Of England in London, Thursday, Nov. 5, 2026. (Alishia Abodunde/Pool Photo via AP)

Governor of the Bank of England, Andrew Bailey, attends the Bank of England Monetary Policy Report press conference at the Bank Of England in London, Thursday, Nov. 5, 2026. (Alishia Abodunde/Pool Photo via AP)

Governor of the Bank of England, Andrew Bailey, attends the Bank of England Monetary Policy Report press conference at the Bank Of England in London, Thursday, Nov. 5, 2026. (Alishia Abodunde/Pool Photo via AP)

FILE - The facade of the Bank of England is seen in th London on Nov. 2, 2017. (AP Photo/Matt Dunham, File)

McCAYSVILLE, Ga. (AP) — Thunderstorms caused record flooding overnight in twin towns straddling the Georgia-Tennessee border, submerging some buildings to their rooflines on Thursday as emergency responders rescued dozens of people.

The storms dropped heavy rain across a mountainous area that drains into the Toccoa River between McCaysville, Georgia, and Copperhill, Tennessee, causing life-threatening flooding on both sides. The Toccoa then flows into the Ocoee River, where the Tennessee Valley Authority was managing water levels at three of its hydroelectric dams.

As much as 8 to 10 inches (20 to 25 centimeters) fell overnight between the north Georgia towns of Blue Ridge and Ellijay, and runoff from uncontrolled streams swelled the rivers below, according to the TVA.

The Toccoa River reached a record high Thursday morning of 18 feet (5.5 meters), according to a river gauge in Copperhill, where fewer than 500 people live across from McCaysville, home to about 1,000. Copperhill officials urged people to take shelter in either town's City Hall as the river reached 2 feet (0.6 meters) above the level forecasters consider “catastrophic."

“It’s over the rooftops in several different areas. Right here in our downtown business district it’s about 6-7 feet high,” McCaysville Police Chief Michael Earley told Fox5 Atlanta. “I have one of my police cars that’s floating down the river right now. Don’t know where it’s at, but it’s somewhere down there.”

Photos and video showed some buildings submerged up to their rooflines as rescue crews in red boats and motorized rafts navigated through deep, rushing water flowing over downtown streets.

Earley told reporters about 40 people were rescued overnight plus five or six more Thursday morning. One firefighter suffered a minor injury and a few residents were treated for suspected hypothermia and shock, “but from what we could tell, everybody looked to be OK.”

The water began receding by late Thursday morning, said Robert Poole, spokesperson for the Fannin County Emergency Management Agency on the Georgia side. But the agency warned people against a false sense of security. “Floodwaters remain extremely dangerous, and conditions can continue to worsen even after the rain has stopped,” it said on social media.

Rescue operations were ongoing, with emergency personnel going house to house and searching overhead with a helicopter and drones, but the effort was complicated by cellphone and power outages, Earley said. The flooding also shut down the McCaysville water treatment plant, prompting a boil water advisory, and it put the city's dump trucks and heavy equipment out of reach.

The quaint downtowns are a destination for scenic railroad rides -- the Blue Ridge Railway on the Georgia side and the Copperhill Special in Tennessee. Both treat tourists to river and mountain views before stopping to sample the restaurants and shops.

This disaster hits particularly hard because McCaysville's downtown was inundated by another flood in August, damaging the police station and post office along with other businesses and residences. The renovated police building reopened just last week.

“Now here we go again,” the chief said. "A lot of people came together, and we’ve been cleaning the town for the past few months. We’re getting ready for Christmas, a lot of McCaysville events, our Christmas parade. So it’s devastating.”

It's crazy to be hit with two such damaging floods in just three months, the chief said. “I don’t know what God is trying to tell me.”

This image from video provided by the Tennessee Highway Patrol shows flash flooding along the Ocoee River in Polk County, Tenn., on Thursday, Nov. 5, 2026. (Sgt. Larry "Hitch" Hitchcock/Tennessee Highway Patrol via AP) CORRECTION: Ocoee River in Tenessee, Toccoa River in Georgia.