Bank of England Official Base Rate Tracker
Is it going to rise or is it going to fall?
The Bank of England (BoE) sets the official bank rate eight times per year. If the bank rate changes, the rate of variable rate savings accounts, mortgages and loans will change too, with a very immediate impact on your finances. On 11th March the interest rate was cut to the current rate of 0.25%. This was in response to Coronavirus hitting the UK which caused the UK stock markets to crash and fears people may need help borrowing money.
BoE official bank rate explained
The Bank of England’s Monetary Policy Committee (MPC) meets 8 times per year to set the ‘bank rate’, otherwise known as the ‘Bank of England base rate’ or the ‘interest rate’. The BoE can decide to keep the rate the same, raise it, or decrease it. Banks don’t have to follow the move that the BoE makes, but many generally adjust their rates after the change to pass any changes to the customer. An increase to the bank rate makes saving more appealing and borrowing more expensive, where a decrease makes borrowing cheaper, but saving less rewarding.
Finder’s Bank of England bank rate survey asks UK economists what they think will happen at the next meeting.
Make an informed decision when deciding to fix interest rates for your mortgage, or lock your money into a term deposit by seeing what these experts predict will happen.
History of the Bank of England official bank rate
The graph below shows the movement in the official bank rate. A lower bank rate reduces the cost of borrowing money so more people are encouraged to borrow – stimulating the economy. Higher interest rates tend to encourage spending. This is how a rise or fall in rates affects the level of supply and demand and therefore the level of inflation.
|Month and year||Official Bank Rate|
Bank of England Base Rate Survey: March 2019
We asked a panel of some of the UK’s brightest minds in economics and property if they thought the base rate would rise or fall in March 2019’s announcement.
- 100% of the economists surveyed predicted the bank rate would hold at 0.75% at the March 21 meeting
- 40% of the economists (four of five) had a positive outlook towards wage growth and cost of living over the next six months
- Ian Bright, Managing Director, Group Research at ING predicted an interest rate fall in September 2019
Read their detailed forecasts, as well as their thoughts on how Brexit negotiations could affect key economic indicators.
Our panel of economists
Brexit negotiations and the bank rate
We asked our panellists if they believed the difficulty the Government had faced over Brexit negotiations (including the defeat of Theresa May’s proposed deal) had changed the UK’s short or medium-term economic outlook.
This is what they had to say:
- Ian Bright“Yes – UK potential growth has already been lowered dues to (1) already decreased investment by the corporate sector reducing growth of capital stock (2) increased red tape for business, especially those wishing to export (3) loss of trust in UK stability and its adherence to international law.”
- Jeremy Thompson-Cook“At the margin, it has affected confidence & investment and that is self-fulfilling circle of slowing output. Business doesn’t trust politicians at the best of times and these are far from the best of times.”
Our expert’s outlook on the top economic indicators:
We asked our panel for their outlook over the six months following the March 2019 announcement for five economic indicators: wage growth, employment, cost of living, household debt and housing affordability.
Of these, wage growth and cost of living saw the most positive outlook, with 40% expecting a positive outlook for both indicators over the next six months.
Employment had the most negative outlook, with 40% of economists giving a negative forecast for this indicator.
|Cost of living||2||3||0|
Dovish or hawkish?
We asked our panellists for their thoughts on whether the MPC should generally take a dovish or hawkish approach over the next 12-24 months following the March 2019 announcement.
This is what they had to say:
- Philip Rush“The building margin of excess demand and excess inflation indicates monetary conditions are too loose and the MPC will need to raise Bank rate by more than markets price. That assumes a relatively orderly conclusion of the EU withdrawal process onto a status quo transition.”
- Ian Bright“Dovish – probably because of slower global growth.”
- Jeremy Thompson-Cook“Depending on the Brexit outcome, the Bank of England could easily be both but I think they will end up leaning dovishly. The Bank has prioritised growth over inflation in the past and I don’t see that changing with Carney in charge.”
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