The Bank of England has yet again raised interest rates. This is the 14th consecutive increase since December 2021 and this time the increase is a 0.25% taking the bank rate to 5.25%. Latest forecast from the Bank say that the UK will avoid recession and suggest the government is likely to meet its pledge to half inflation by the end of the year but interest rates will have to remain higher for longer.
Bank Rate is also known as 'the base rate' or 'the interest rate'. It influences many other rates in the UK, including those you might have for a loan, mortgage or savings account. If you have a mortgage or loan, high Bank Rate means your payments may go up. If you have savings, that means you may get a higher return.
How high will interest rates go?
The future is uncertain, so it is unsure about what will happen to Bank Rate in future. It will depend on what happens in the economy and what the thoughts are of the rate of inflation over the next few years.
The next inerest rate review will take place on Thursday 21st September 2023.
What does the Bank of England consider when it decides interest rates?
Before they make a decision, they try to understand the state of the economy now and what it’s likely to be in the coming months. The things they look at include:
- how fast prices are rising now, and how that is likely to change
- how the UK economy is growing now, and how that is likely to change
- how many people are in work now, and how that is likely to change
Why have interest rates in the UK gone up?
Interest Rates have been put up to get inflation back down.