Bank Rate (Bank of England)

Bank Rate is the main policy interest rate of the Bank of England, the central bank of the United Kingdom. It is the rate the Bank pays on the reserves that commercial banks and building societies keep in their accounts with it, and it is set by the Bank's Monetary Policy Committee (MPC). Because banks will not lend to each other overnight for much less than they can earn risk-free at the Bank, Bank Rate anchors short-term interest rates across the sterling economy.

Bank Rate is sometimes called the base rate, and many UK tracker mortgages are priced as "Bank Rate plus" a margin. It plays the same role as the federal funds rate target in the US and the deposit facility rate of the European Central Bank (ECB). On 5 November 2026 the MPC raised Bank Rate from 3.75% to 4.00%.

Picture the Bank of England as a very safe savings account that only banks can use. Whatever interest it pays on that account becomes the floor for what banks expect to earn elsewhere. If the Bank pays 4%, no bank will lend spare cash to another for 3%; it would simply leave the money at the Bank.

So when the MPC nudges that one number up or down, the effect spreads out like a ripple: to the rates banks charge each other, then to savings accounts, mortgages and business loans. A higher Bank Rate makes borrowing dearer and saving more attractive, which slows spending and, over time, price rises.

The Bank of England, founded in 1694, gained operational independence over interest rates in May 1997, confirmed by the Bank of England Act 1998. Under that law the government sets the target and the MPC decides how to meet it. The target is 2% annual inflation measured by the consumer price index. If inflation misses the target by more than one percentage point in either direction, the Governor must write an open letter to the Chancellor explaining why. This makes the UK one of the earliest examples of formal inflation targeting with an independent central bank.

• The committee. The MPC has nine members: the Governor (Andrew Bailey since March 2020), three Deputy Governors, the Chief Economist and four external members appointed by the Chancellor.
• The meetings. It meets eight times a year and decides by majority vote; each member's vote is published with the minutes.
• The other tool. Alongside Bank Rate, the MPC decides the size of the Bank's gilt holdings through quantitative easing and quantitative tightening.

Since 2009 the Bank has paid Bank Rate on all reserves held by banks under its Sterling Monetary Framework, a "floor" system similar to the Fed's interest on reserves. The overnight sterling benchmark SONIA trades a few hundredths of a percentage point below it. From there, changes pass into the yields on gilts and other money market instruments, into the rates on savings accounts and new mortgages, and into the pound'sexchange rate.

The full effect on output and prices takes time. The Bank's own work suggests the peak effect on inflation arrives around one to two years after a change, one reason the MPC looks ahead rather than at today's inflation alone (see policy lags). Fixed-rate mortgages, which most UK borrowers now hold, slow the pass-through, because households only feel a change when their deal expires.

The Bank has published a lending rate since 1694, which makes Bank Rate one of the longest-running interest rate series in the world. It was 2% for most of the 1930s and 1940s, and reached 17% in November 1979, during the fight against the inflation of that decade. During the 2008 Financial Crisis it was cut from 5% to 0.5% in under six months, and in March 2020 it fell to a record low of 0.1%, close to the effective lower bound.

From December 2021 the MPC raised it fourteen times in a row to 5.25% by August 2023, as UK inflation peaked above 11% in October 2022. It then cut in steps from August 2024 to 3.75% in December 2025, held through most of 2026 and raised it to 4.00% on 5 November 2026.

Paying Bank Rate on the large reserves created by QE has become costly for the public finances when rates are high, because the Treasury indemnifies the Bank's asset purchase fund. Some commentators and politicians have proposed paying less than Bank Rate on part of the reserves, a step the Bank has argued would weaken its control of rates. Others debate whether a single rate can manage both inflation and financial stability, and whether the MPC moved too slowly in 2021.

• Bank of England: Monetary policy
• Bank of England: Official Bank Rate history