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Interest rate increases by 0.75% to 3%

The Monetary Policy Committee voted by a majority of 7-2 to increase the Bank Rate to 3%.

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.

At its meeting ending on 2 November 2022, the MPC voted by a majority of 7-2 to increase Bank Rate by 0.75 percentage points, to 3%. One member preferred to increase Bank Rate by 0.5 percentage points, to 2.75%, and one member preferred to increase Bank Rate by 0.25 percentage points, to 2.5%.

What is Bank Rate?

Bank Rate is the single most important interest rate in the UK. In the news, it’s sometimes called the ‘Bank of England base rate’ or even just ‘the interest rate’.

Our Monetary Policy Committee (MPC) sets Bank Rate. It’s part of the Monetary Policy action we take to meet the target that the Government sets us to keep inflation low and stable.

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Bank Rate determines the interest rate we pay to commercial banks that hold money with us. It influences the rates those banks charge people to borrow money or pay on their savings.

How Bank Rate affects your interest rates

If Bank Rate changes, then normally banks change their interest rates on saving and borrowing. But Bank Rate isn’t the only thing that affects interest rates on saving and borrowing.

Interest rates can change for other reasons and may not change by the same amount as the change in Bank Rate. To cover their costs, banks need to pay less on saving than they make on lending. But they can’t pay less than 0% on savings or people might not deposit any money with them.

This means that when Bank Rate comes close to 0%, how far banks pass it on to lower saving and borrowing rates reduces. And as Bank Rate starts to rise away from close to 0%, that’s likely to lead to less of a rise in saving and borrowing rates.

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