Interest rates


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A Level economics

2018 Edition available now.

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Interest rates

First interest rate rise for 10 years

The official UK bank rate has been raised for the first time since July 2007, from 0.25% to 0.5%.

With UK growth steady at around 1.5% per year, and with CPI inflation at 3%, and unemployment falling to record lows, the Bank of England has concluded that the UK economy is strong enough to withstand this modest rise. The 0.25% increase, which followed a 7 to 2 vote by the monetary policy committe, is likely to be the start of a period of tighter monetary policy - or, as many are calling it 'less loose' monetary policy.

We can also conclude that the Bank of England is concerned that the unemployment rate is now close to its non-accelerating inflation rate. It must also be remembered that the drop from 0.5% to 0.25% was a response to the Brexit uncertainty which, while it still exists, has not led to the recession which was widely predicted. Of course, the Bank of England could argue that its looser monetary policy is part of the reason for the post-Brexit bounce.

Inflation Report Press Conference

Interest rates

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