Bank of England interest rate rises to highest level since global financial crisis

With UK inflation forecast to hit 10% in 2022, the Bank of England has increased the cost of borrowing to its highest level since 2009

What is the Bank of England base rate?

Given it lends money to the high street banks, its interest rate - also known as the ‘bank rate’ or ‘base rate’ - has a direct influence on how much members of the public and businesses pay on top of a loan.

How has Bank of England rate changed?

What will the interest rate increase mean?

Giving its reasoning for the change, the central bank said it expected inflation to peak at 10% in 2022 - a 40-year high - and forecast a 0.25% contraction in the economy in 2023 as households spending power is set to decrease by 1.75% this year.

While it’s uncertain whether further interest rate rises will be on their way this year, the worsening economic outlook has led commentators to believe the base rate could go up to 2% in 2023.

What has been the reaction to the Bank of England rate rise?

"The prospect of inflation at 10% later this year will cause shock and fear throughout the country for people who are already finding themselves unable to heat up food, limiting showers to save on energy costs, and riding buses to keep warm,” said Dave Innes, JRF’s head of economics.

"The government must ensure that as a minimum, benefit are increased to match the real rise in living costs. The social security system was woefully inadequate even before the cost of essentials began to shoot up, and needs urgent strengthening if we are to protect people from the harm that could be inflicted in the months to come.”