LONDON — Some European leaders wanted a superhero negotiator to take on Vladimir Putin and Donald Trump, secure a fair peace deal for Ukraine, and safeguard the continent’s own security, as ceasefire talks gather pace. 

They were never going to find one. 

That had already become the view of diplomats and officials close to the discussions, granted anonymity to comment on the sensitive Ukraine peace process that’s dividing opinion in European capitals, even before the EU decided on Friday that it would have to be a team effort. 

The push to identify one representative to speak for Europe was understandable. The appeal of having a single, respected leader taking the reins is largely based on a desire to project European strength and unity — as well as an interest in making negotiations with Russia, the U.S. and Ukraine efficient and effective. 

Ukraine’s President Volodymyr Zelenskyy himself said this week he wanted Europe to identify within days who will take its place in the talks, and suggested he’d prefer it was one person (he even indicated that he had a preference, though would not reveal a name).

He didn’t get his way. Instead, leaders at a summit in Dublin on Friday, decided that the “E5” made up four big EU countries ― Germany, France, Poland and Italy ― and the U.K., plus officials from the European Commission and Council, would take the work forward as a team.

Technical discussions

The search for a top representative to fill Europe’s seat at the negotiating table at the next round of peace talks had become a political obsession in Brussels that missed at least two big points. 

The first is that the leadership level is not currently where the negotiations are at. Talks this week in Abu Dhabi were technical discussions between senior officials. The big political players like Putin and Zelenskyy were not there, never mind Trump. Russia sent a Kremlin aide to lead its team and Ukraine tasked its intelligence chief with making its case. 

If these officials make progress toward a deal, leaders will no doubt want to get involved. Ultimately, it will be leaders who sign any peace agreements that follow — and there’s no limit on the number of EU presidents or prime ministers who could join such a meeting as signatories or guarantors of the final deal. 

The next thing that needs to happen, according to both Ukraine and the U.S. envoys mediating the talks, is for Europe to join the discussion with Russia — at this technical level. 

‘Not a superstate’ 

The second point some member states and Brussels insiders were missing is structural: There are just too many European stakeholders with equally important but very distinct interests and remits, making consolidation of all the different strands under one person impossible. 

The Commission can’t negotiate Europe’s future security architecture — that’s for NATO members and national capitals to decide. But equally NATO, Paris and Berlin cannot negotiate EU sanctions or Ukraine’s accession to the bloc — these are in the Commission’s remit. 

And the idea that the “E3” — Europe’s big economic and military beasts of Germany, France and the U.K. — would let either the Commission, the European Council or NATO do it all on their behalf is not realistic. 

As one EU diplomat put it: “The reason why Europe hasn’t found one person who can represent the whole of Europe is that Europe is not a superstate.” 

In the context of the Ukraine talks, European interests encompass many EU member states but also countries like the U.K., and Norway, as well as Turkey and Moldova, the diplomat said. “Who can promise troops on the ground on behalf of the rest of Europe? Who can offer billions in financing? It’s difficult.” 

The conclusion some officials involved in the Abu Dhabi process reached was that Europe would have to be represented by a team, much as it has been already, albeit at one step removed from the main negotiating room so far. Different members of that team will own different issues. 

What Putin wants

Then there’s the question of content: What will be discussed and what will Team Europe’s collective position be? 

“What we actually say is more important than the exact configuration of the people in the room,” Sweden’s Prime Minister Ulf Kristersson said on his way into Friday’s meeting of EU leaders.

The reason why American and Ukrainian officials want Europe’s participation is because they believe beginning a discussion about reshaping the continent’s security structures could unlock a more cooperative approach from Russia. 

Russia’s top negotiator Vladimir Medinsky said Europe’s security framework was the main topic discussed in Abu Dhabi this week: “The conflict in Ukraine showed that the entire security system operating after Yalta and Potsdam is working poorly, and an abscess broke through in Ukraine,” he said. 

Ukraine’s team noted that the hardline Russian approach softened a little when Moscow’s representatives saw the chance to talk about their wider demands on European security.

But Europe itself wasn’t part of that conversation.

Timing is still everything

The first thing to resolve will be on the sequencing of the negotiations — most significantly, when should Europeans allow themselves to discuss Russia’s demand to overhaul regional security? This is a critical and potentially existential question for European countries. And it is already a subject on which top EU officials are weighing their positions with care. 

Those close to the talks believe a clever way can be found to offer Russia a conversation about regional security as part of careful sequencing of the negotiations, without binding the issue completely into the final peace agreement for Ukraine. 

But different EU spokespeople are saying different things on this sequencing point, in what is either a clever strategy, or a sign of continuing disarray.

Kaja Kallas, the EU’s top centrally contracted diplomat, said there must be no discussion of wider European security architecture — such as NATO configurations, troop deployments and working forums for consultations with Russia — until after the peace deal is finalized. 

But in Abu Dhabi, EU officials signaled their readiness to allow parallel tracks in the talks,  so Ukraine’s peace settlement and Europe’s future security structures could be discussed at the same time. 

Officials in national capitals also agree that the “sequencing” of the negotiations on this point is key. Behind the scenes different countries and factions have different views on what the right strategy should be, just as they struggle with the question of whether it’s right to engage directly with Putin at all. 

And of course the question of Europe’s role may yet be moot. The U.S. envoys said on Thursday night that Putin had consented to letting Europe join the talks, but the Kremlin called this into question on Friday. 

After the negotiations in Abu Dhabi concluded this week, Jared Kushner, Trump’s son-in-law and senior envoy, acknowledged the twin problems he faces. “If Europe could identify one person to speak on their behalf, that would be a bigger achievement than getting the Russians to include them in the negotiation,” he said.

MADRID — Spain’s Prime Minister Pedro Sánchez sees little room for optimism regarding today’s world. “At the end of this path lies another world war,” the Socialist wrote in today’s edition of the U.S. publication Foreign Affairs.

In an op-ed that encapsulates his government’s foreign policy views, Sánchez said the erosion of multilateralism is “multiplying the chances that any crisis will quickly spiral into planetary annihilation.”

According to most polls, Sánchez is set to lose power after the Nov. 29 snap election in his country, with right-wing and far-right parties expected to win a majority in parliament. In the op-ed he defended his government’s recent actions, such as Madrid’s decision earlier this year to deny Washington the use of Spanish bases in its war against Iran.

It “was not an act of hostility toward an ally. Nor was it an expression of neutrality or sympathy for the Iranian regime,” Sánchez wrote. Instead, the decision was “a judgement that getting involved would enable escalation.”

Sánchez added that “to keep its commitment to peace, Spain had to be willing to say no, even when doing so carried a political cost.”

“Had more countries done the same, the wars in Gaza and Iran would have been far harder and costlier to wage,” the prime minister speculated, holding up the Spanish government he has led since 2018 as an example to be followed.

The Socialist also criticized the war-readiness strategy the European Union has recently endorsed, noting that “even centrist leaders are embracing the language of war preparedness.”

“Although they do not intend to start a war, their words feed a dangerous militaristic mindset,” the prime minister added.

Sánchez grounded his opposition to war in decades of Spanish civil society activism against armed conflict, flagging the ¡No a la guerra! (“No to war!”) protests in Spain from when the conservative government of José María Aznar backed the 2003 invasion of Iraq.

“The world cannot afford to ignore them again,” wrote Sánchez, who claims to have taken part in the demonstrations.

In the article Sánchez was skeptical of ad hoc solutions such as the Coalition of the Willing, a group of 34 countries that have promised enhanced aid to Ukraine, ascribing such initiatives to the ineffectiveness of multilateralism.

Instead, pitching himself as a champion of peace and small and mid-sized powers, he called for reform of the United Nations, including the Security Council, which “does not reflect today’s world.”

He urged that the veto powers of the Council’s permanent members be strictly limited, especially in cases involving “mass atrocities, genocide, crimes against humanity and war crimes,” and advocated the eventual elimination of the veto.

He also proposed that the terms of the Council’s non-permanent members be extended and that seats be awarded primarily to countries from Africa and Latin America.

Finally, Sánchez supported the election of a woman as U.N. secretary-general.

Christine Lagarde, the departing president of the European Central Bank, would fare as well as center-right candidate Edouard Philippe were she to run in next year’s French presidential election, according to new polling commissioned by POLITICO.

Lagarde, who served as French economy minister almost two decades ago under former President Nicolas Sarkozy, would get 14% of the vote were she to run instead of Philippe, who would receive 13.5% against a similar slate of candidates, according to polling from Cluster17.

While Lagarde has previously ruled out running, her early departure from the ECB next February has renewed speculation she could take part in a contest where centrist and right-wing candidates have struggled to break through.

In a highly unlikely scenario in which Lagarde runs next to Philippe and multiple recently declared candidates, including Olympic judo champion Teddy Riner and columnist Natasha Polony, she would also rival President Emmanuel Macron’s former prime minister with 8% support.

In both cases, far-right candidate Marine Le Pen and leftist hopeful Jean-Luc Mélenchon are projected to finish first and second, respectively, which would qualify them for next May’s runoff round.

Cluster17’s survey, the first public poll to test a Lagarde candidacy, shows the centrist vote is “very fluid,” according to the institute’s president, Jean-Yves Dormagen. “At this stage there is a patent lack of leadership in the moderate and centrist space.”

The centrist camp is grappling with an internal conflict between Philippe and Gabriel Attal, another former prime minister. Philippe, who was once a favorite to face Le Pen in the second round, has struggled to gain traction despite months of campaigning, POLITICO’s Poll of Polls show.

Conservative Bruno Retailleau, who served as interior minister under Macron, is also a candidate along with right-wing Cannes Mayor David Lisnard and center-left MEP Raphaël Glucksmann. All hope to defy the increasing odds of a Le Pen-Mélenchon runoff.

Lagarde previously dismissed her candidacy as “not a good idea at all,” but since announcing her early exit from the ECB on Oct. 29 she has avoided answering the question directly.

Asked by POLITICO whether she was still ruling out running during a panel at the Paris Peace Forum on Wednesday, Lagarde stuck to her guns: “I said I want to recover my freedom to speak, my freedom to engage in matters that are not monetary policy, and that’s what I want to do.”

Lagarde will leave her ECB post on Feb. 7 next year, about a month before presidential hopefuls must formally apply to run.

LONDON — Democratic wins across the U.S. brought a brief rush of excitement to Britain’s left-wing establishment last week — but they also contained warnings for Prime Minister Andy Burnham’s government.

Labour insiders privately cheered the midterm results, interpreting the outcome as a damning verdict on Donald Trump’s politics and a win for Democrats’ unifying strategy of focusing on living standards, despite ideological differences across their slate of candidates.

It’s left Burnham’s followers cautiously optimistic about his approach so far as prime minister, which has included incremental measures to lower costs, such as reducing food tariffs and offering money off energy bills.

A Labour MP, granted anonymity like others in this article to speak frankly, said their own engagement with Democratic New York Mayor Zohran Mamdani’s team had hammered home “the politics of trying.”

“If people think you’re not even trying, which obviously is what they thought about Trump, then you’re just going to get blown away,” they said. By making small adjustments, the MP argued, Burnham has begun to “develop a coherent argument — which is actually voters have to see you trying on the cost of living.”

Yet beyond this apparent vindication of the PM’s basic strategy, members of his party see clear warning signs for the incumbent British government in the U.S. political shift. An administration only just coming out of a dire stretch in public opinion polls, they worry, could take the wrong lessons from the Dems’ triumph across the pond if they don’t heed the deep anti-incumbent sentiment that drove it.

Reasons to be fearful

Burnham has badged his fledgling administration as a “cost of living government” since he replaced Keir Starmer at the top of Labour earlier this year.

Yet he has faced criticism from some quarters that a government-wide budget unveiled last month lacked real ambition — and now the pressure is on to deliver before a general election, due by 2029.

Claire Ainsley, a former adviser to Starmer who works for the Progressive Policy Institute think tank on both sides of the Atlantic, told POLITICO that, despite arguments about the future direction of the Democratic Party, “what they’ve all had in common is a real focus on affordability.”

“They’ve really focused on bread-and-butter issues for everyday Americans, and clearly that’s the path to be building and hopefully winning in 2028,” she said.

Ainsley highlighted striking moves by a host of prominent Democratic politicians, including Mamdani, who has offered childcare support to New Yorkers, and New Jersey’s Mikie Sherrill — who declared “a state of emergency” on utility bills. Virginia’s Abigail Spanberger has targeted the cost of prescriptions.

“You’ve still got people who are worried here and wouldn’t necessarily say the cost of living is being relieved,” Ainsley warned. “You’ve got interest rates going up and there are lots of warning signs on our dashboard.”

Adam Terry, executive director of the Future Governance Forum think tank, argued likewise that Burnham’s action on the “little things” was part of the answer — but that he has not yet tackled “the big structural questions, namely: why is the economy so sluggish?”

That need to provide deeper solutions to Britain’s woes only raises the stakes for Burnham’s promised ten-year plan and his broader strategy for rewiring the British state, Terry said.

The same Labour MP quoted at the top of the piece — while broadly positive about Burnham’s impact so far — said: “It’s not a coincidence that basically every government in Britain since Brexit has failed usually within 18 months — and I would include in that Keir Starmer’s. Clearly systemic change is definitely required.”

Deborah Mattinson, a Labour member of the House of Lords and pollster who has worked in both the U.S. and U.K., cautioned progressives against believing the age of Trump-style politics is over, “because until things that encourage Trumpism are fixed, it won’t happen.

She added that in the U.S. — and in Germany and France, too — “working people feel the contract that they made with the state has fallen down.”

“The U.K. needs to be really mindful that if you don’t fix those fundamental grievances that people have, then you continue to be in a bind,” Mattinson added.

Up against it

Even those at the top of Labour sense that the PM is up against it if he is to buck the anti-incumbency trend demonstrated by the punishment of Republicans right across the United States.

A senior Labour aide observed that the midterm results strengthened the Democrats as they begin to target the White House in 2028 — but in the meantime they face a similar dilemma of delivery as Burnham.

No.10 Downing Street knows it needs to improve people’s lives, the aide said — but it remains “very difficult” to pull one lever that makes a substantial difference without upsetting financial markets.

Burnham has already been quick to draw a direct line between the U.S. electoral shift and politics closer to home. “I can’t get people’s cost of living pressures down until the conflict in the Middle East is resolved,” he said last week — while urging world leaders to “unite” around efforts to wind down the war.

Here, too, the prime minister may be testing the limits of his own country’s ability to shift the diplomatic dial — while few expect a calmer international picture in which Burnham can really bear down on costs.

Britain will stick to a steady drumbeat of quiet diplomacy for the rest of the year, two people inside government said, including talks with G7 and G20 partners, ongoing contact with Gulf allies, and a bid to maximize the U.K.’s G20 presidency starting in January. 

But a minister in Burnham’s government predicted that when it comes to international relations, and especially military action, Trump’s election drubbing “will not make much difference” to his mindset. 

Anxiety in London over Trump’s next move has certainly not been quelled by initial post-election ripples within the White House, either. Ministers and aides are watching nervously for further news of Secretary of State Marco Rubio’s future — generally seen as a reliable interlocutor with the U.K. — while one serving British diplomat said Stephen Miller’s installation as Trump’s chief of staff represented a “red flag.” 

The senior party official quoted above said: “The U.S.’s relationship with every single country in the world has just been thrown into a level of uncertainty and fluidity.”

Norwegian Prime Minister Jonas Gahr Støre is already unpopular with Donald Trump, who blames his government for not giving him the Nobel Peace Prize, and recently dismissed Norway as a “shithouse country.” 

Now Støre is casting doubt on the U.S. president’s bullish prediction that a “big, beautiful” peace deal is close to being signed to end nearly five years of Russia’s full-scale war with Ukraine. 

In an interview with POLITICO ahead of the restart of talks in Abu Dhabi, Støre gave a sober assessment of Russian leader Vladimir Putin’s mindset and the chances of an imminent ceasefire. 

And as the White House touts plans to overhaul the established security order in Europe, Støre bluntly warned that the continent’s defenses must not become a bargaining chip in the negotiation to end the war in Ukraine.

“I would be cautious,” Støre said, when asked what he expected to come out of the latest talks scheduled for the United Arab Emirates. “Abu Dhabi is a stepping stone, and one output of it should be a follow-up quite soon after.”

According to Støre, the Abu Dhabi agenda will potentially include talks about a ceasefire for the Black Sea to allow grain to be safely transported, a ceasefire on energy infrastructure, a front-line freeze in the conflict, and other “confidence building measures” such as prisoner swaps. There has also been work on the question of security guarantees to ensure Putin does not attack again, he said.

Negotiating teams from Moscow and Kyiv are due to sit down with the United States in Abu Dhabi on Nov. 10-11. It is the first three-way meeting the sides have had since February, and comes after a month of intensifying diplomacy and increasingly impatient demands from Trump to deliver a deal. 

Norway’s leader has found himself at the center of the storm more than once in that time. Working with his close friend and regional ally, Finland’s President Alexander Stubb, Støre tried to rescue the faltering peace process last month by hosting a meeting with Trump’s envoy Steve Witkoff and Ukrainian President Volodymyr Zelenskyy in Oslo. 

That got Ukraine and America back on the same page and prepared the ground for the Abu Dhabi discussion. But a day after the Oslo meeting, Witkoff was in St. Petersburg praising Putin to his face as a “humanitarian,” a statement that horrified many of Ukraine’s European allies. 

Støre said he is too diplomatic to reveal how the remark made him feel. But he added: “It would not have been part of my vocabulary.”

Given Witkoff’s pivotal role in the negotiations, as well as Trump’s own recent declaration that Russia has been “fine” in Ukraine, does Støre trust these individuals as guardians of a fair peace process for Ukraine? Should Europe trust them, or not? 

For all his tact and experience as a foreign minister, the 66-year-old Norwegian’s reply is not a straightforward yes. “I trust that the U.S. is seeking a way to end this war,” he said. 

Hotline to the Kremlin

On Oct. 27, Støre and Stubb took matters into their own hands. Rather than wait for the U.S. to negotiate a deal with Putin that would have vast ramifications for Europe, they picked up the phone to call the Kremlin directly. 

It was a rare outreach from pro-Ukraine leaders to Putin, who has been frozen out by Europe since Russia’s full-scale invasion began in 2022. Their 90-minute call stunned and dismayed some of the Nordics’ neighbors in countries such as Denmark and Latvia, who believed Europe should continue to isolate the Russian aggressor.

Støre rejected that idea and defended their decision to open up a line of communication directly to the Kremlin. “Let’s admit it. He is not isolated,” he said. “The only voice reaching Moscow comes from Washington.”

While Norway and Finland have good relations with the American negotiators, the war is happening in Europe, he said. “Living month by month … thinking that this war will end by Europe not talking to Moscow, I think, is an illusion … We believe that there should be European voices reaching Putin, with the message of why and how we support Ukraine.” 

Rational. Not a peacemaker

Having spoken to Putin, how would Støre characterize his state of mind? Did he seem rational in the conversation?

“I would describe it as professional. I would describe it as rational,” he said. “It was a conversation where we agreed the principles — we would not interrupt, we will keep [to] statements. His arguments were perfectly clearly transmitted.”

Some reports suggested that Putin used the call to lecture the two Nordic leaders on Slavic history as his justification for the war, an impression the Norwegian wants to correct: “I just have to say, you know, I was present. He didn’t.”

Does Støre believe Putin wants peace? “Well, if he had wanted peace, there would have been no war at the outset. If he had wanted peace during these five years, when he sees that his country is regressing, that neighboring countries are becoming members of NATO, that his people are being killed, and all these terrible things, the war would have ended. So that is one side to that.”

But at the same time, “the fact that he picks up that phone” to talk “I think that signals, at least that there’s a readiness to sit down.” And while Støre has not seen signs “so far” that Putin is genuinely open to a deal, sending a team to Abu Dhabi and being responsible for “not delivering anything” also has “a price.”  

Later this week, European leaders are due to debate who should represent them in Ukraine negotiations when they meet for an informal summit in Dublin. Italian Prime Minister Giorgia Meloni is particularly frustrated that the EU has so far failed to make a plan for how to make sure its voice is fully heard when decisions are made. 

Støre said he had followed the debate about whether somebody should be “talking on behalf of a larger group” in Europe — “and I think there should be.”

It could be one individual, or a different arrangement, he said. Crucially, Europe needs to decide on its core collective messages and goals and then appoint a person or people to deliver those to Trump and Putin, he said. Increasingly, Støre said he had been looking to the so-called E3 to play this role — Europe’s biggest three economic powers, Germany, France and the U.K.

Whoever ends up speaking for European interests, one urgent task facing the region is how to stop Trump and Putin carving up a new security plan, raising fears in Europe over cuts to the U.S. troop presence, or weakening NATO’s role — a longtime goal of Russia’s leader. 

Last week, Trump and his team suggested the U.S. was working on a major overhaul of European security that the president said might involve “the whole of Europe.” 

Trump’s son-in-law Jared Kushner said the goal was “to develop practical arrangements that address the security concerns of all sides.”

But rolling the future of America’s role in European security into a negotiation about ending Russia’s invasion of Ukraine is not acceptable to Norway, or Støre says, to other Nordic-Baltic countries. 

“Any issues relating to European architecture on security will have to be dealt with after the end of the war,” Støre said. “Russia keeps floating the ideas they had in the end of [2021] about where there could be NATO and where there could not be NATO. That is not for Russia to decide. This has nothing to do with this point in the negotiations.” 

In private, some European officials are resigned to the fact that Trump’s recurrent bashing of NATO allies has already weakened the effectiveness of the alliance as a deterrent against Russian aggression.

Støre insisted NATO remains in good shape. “We can discuss whether this or that statement helps,” he said. “I think sometimes it’s hard to say yes, they do help.”

LONDON — Nigel Farage blamed Donald Trump’s midterms catastrophe on broken anti-foreign intervention promises Thursday, branding his decision to launch a war with Iran as “bizarre.”

The U.S. president’s right-wing ally in Britain echoed other high-profile conservative figures in lamenting the price-spiking conflict and warned against a fresh campaign of attacks in the Middle East.

Farage has long considered Trump a personal friend, but has come under pressure to distance himself from the U.S. president, who is deeply unpopular in the U.K. 

The Reform leader has been more critical against a backdrop of global economic woes triggered by the war waged against Tehran by America and Israel.

Farage, leader of the insurgent right-wing Reform UK party, told reporters after a defense speech in London that he wouldn’t have supported a drawn-out conflict with Iran. He said it was “bizarre” that Trump, of all people, took such action, considering he took power on a pledge to avoid endless foreign wars.

Asked about the biggest lesson he took from the midterms carnage for the Republicans, Farage said: “Keep your promises.”

He praised Trump’s “very good” track record of staying faithful to the electorate during his first term, but said, “He broke a promise — that was no more foreign wars.”

“We’re eight months in, and the resultant rise in gas and diesel prices, more than anything else, is what did them in,” Farage said.

He later told broadcasters that he worries the U.S. president will “continue aggressively attacking Iran” now that he has lost Congress.

Farage was initially supportive after Trump launched strikes in February. He urged the U.K. government to “back the Americans in this vital fight against Iran!”

But within two weeks he changed his tune. He subsequently urged ministers not to “get involved directly in another foreign war.”

Senior figures in Reform UK have been trying to distance themselves from Trump in the wake of MAGA’s midterm drubbing at the hands of the Democrats.

One high-ranking adviser, granted anonymity to discuss transatlantic relations, said the party would continue building “good relations” with senior Republicans like JD Vance and Marco Rubio.

“Reform already has good relations with multiple Republicans, and that process will continue,” they added.

Others argued for greater network building with right-wing movements in Europe.

“I’ve never been a huge fan of Mr. Trump,” said one official. “He does speak for a particular slice of American society, but in practical terms what happens on the continent is somewhat more important,” the official added, pointing to the rise of right-wing parties in France, Italy and Spain.

“Given we have a PM that is committed on salami slicing us back into the EU,” they added. “Personally, I think that’s more important than America.”

U.S. President Donald Trump’s midterm election losses haven’t helped the U.K. economy — yet.

The Bank of England’s nine-member Monetary Policy Committee announced on Thursday it has overwhelmingly voted to increase interest rates to 4% from 3.75%, the first time since August 2023 to combat rising prices driven by the war in Iran.

Unlike the U.S. Federal Reserve and European Central Bank, the Bank of England has been reluctant to raise rates for fear of denting the British economy.

Until now, Governor Andrew Bailey and other MPC members have preferred to wait and see whether higher energy prices spilled over more broadly.

But the Bank was forced to increase rates after U.K. inflation came in at 3.5% in September, while the economy posted better-than-expected growth figures — raising the risk prices could take off.

The MPC on Wednesday voted 8-to-1 to raise rates, arguing the energy shock since the war began has built “sufficient” inflation pressures to justify a hike.

The dissenting vote from Catherine Mann was for a larger increase of 0.5 percentage points.

But Bailey made no secret of the fact that the future health of the U.K.’s economy depends on what the U.S. does in Iran.

“Today’s increase shouldn’t be seen as the first in an inevitable long sequence of hikes,” Bailey said.

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

The Bank projected inflation would pick up to nearly 5% by the second quarter of 2027, higher than its previous forecast, with greater spillover into wages and other prices.

Under an adverse scenario, in which prices stay higher for longer and the conflict in the Middle East continues to flare, inflation would hit 6.2% in the third quarter of 2027.

Thursday’s decision, which comes a week after Chancellor John Healey delivered his first budget under the specter of Brits paying the highest energy prices in three years, will further squeeze struggling U.K. households and businesses already hit with higher energy bills and mortgage rates.

The tougher financing backdrop could hurt the Burnham government’s promises to tackle the cost of living. Yet rampant inflation would also undercut that pledge.

Still, the Bank’s top brass also pushed back on market expectations that rates could by hiked to 4.75% or 5% in 2027 — which could help bring down decades-high government borrowing costs.

The Trump factor

The decision comes as the rout of Trump’s Republican Party at the U.S. midterm elections on Tuesday raised the prospect of a peace deal in the Middle East.

A thaw in the conflict could bring down fuel prices by easing pressure on oil supplies and improve the cost-of-living picture for U.K. households.

There were reports Trump could respond to his party’s losses by embarking on a bombing campaign in the Middle East, but the U.S. president appeared to accept on Wednesday that higher petrol prices affected his popularity and struck a more conciliatory tone on the prospect of peace negotiations. 

U.S. Vice-President JD Vance blamed the Iran war for the electoral losses. And U.K. Prime Minister Andy Burnham said Wednesday that the elections create an opportunity to focus on the cost of living.

Oil prices fell sharply on Wednesday, amid expectations Democrats could also limit Trump’s funding for the conflict. The possibility of a ceasefire could yet be subject to Trump’s whims.

Regardless, U.K. consumers will feel the pinch through a rise in the energy price cap in January. 

Even if falling oil prices persist over the next few weeks, the price cap is likely to rise substantially because of a lag in the way it is calculated. 

The Bank forecast the cap will hit £2,150 in the first quarter of 2027. Food price increases, which have so far been muted, could hit 4.75% by mid-2027 as companies pass through higher costs.

Healey’s budget will knock 0.25 percentage points off inflation by the second quarter of next year, the Bank said, while tighter fiscal policy to bring down the deficit would likely detract from growth in the medium term.