After interest rate rise, the question now is how many more

And so, at last, it begins. 

Today the Bank of England did what more or less everyone expected, and raised interest rates from 3.75% to 4%.

There is much to discuss about the implications for all of us. For not only does this mean more expensive borrowing, but the increase also comes at the very moment life is getting tougher in other respects.

Energy bills are on the rise (even after you take into account the measures in last week's budget).

The government's efforts to bring the deficit down mean "fiscal policy", which is to say the combined impact of taxes and government spending, is pushing down on our living standards.

Based on the figures in the Bank of England's latest set of economic forecasts, households must prepare themselves for two years of falling post-tax income.

Things, in other words, already felt pretty bleak before the Bank's decision today.

Yet, in the end, the Bank's main job is to try to keep inflation - the rate at which prices are rising each year - as close as possible to 2%.

And its latest forecasts suggest it will near 5% next year, and the Bank's view is that while high inflation in the short run could be temporary, the higher it goes and the longer it stays there, the greater the chance it proves "sticky" and much harder to bring down.

All of which is why there is one big question everyone is asking now.

How soon until the Bank raises interest rates again?

What emerged from the reams of documents published by the Bank alongside its decision today is that most members of the Monetary Policy Committee that decide interest rates think they will have to raise them soon.

Consider the words of the governor, Andrew Bailey: "Without news which softens the risks to inflationary pressures, I can see the argument for a further increase in rates..."

Consider the fact that another member of the committee, Catherine Mann, thought rates should have been lifted not by a quarter percentage point today but by half a percentage point.

So: how many more rises?

Look at the interest rate curve out there in financial markets - the net product of millions of investment decisions made by people effectively betting on the future path of UK rates - and you see they're pricing in another three or maybe four increases in rates in the next year or so. Is that what we should be steeling ourselves for?

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The Iran war

The answer to that question depends, as does so much else, on what happens next in the Middle East.

As the governor hinted, a sudden end to the war would, in turn, mean oil and gas prices could fall back quite sharply.

That would mean lower inflation in the coming years (since energy prices feed gradually into all sorts of other items, most notably food).

It's possible, in that scenario, to squint and imagine interest rates not rising much further at all.

But if the war continues for much longer, then that implies higher energy costs for longer and among the bits of analysis done by the Bank in the run-up to this meeting is one that illustrates why this matters.

Businesses have been able, to some extent, to absorb the rising cost of energy without passing all of it onto households, in the form of more expensive products. But that can only go on so long, and it may now be meeting its limit.

All of which is why the Bank has finally done what other central banks have already done, and raised interest rates.

The simple fact is that we are living in a world beset by war - with more military conflict than for decades. Higher borrowing costs are just one of the depressing consequences.

(c) Sky News 2026: After interest rate rise, the question now is how many more