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United Kingdom Interest Rate

United Kingdom Interest Rate

Bank Rate in United Kingdom

The Bank of England's policy rate over the last decade was initially maintained at historically low levels to support post-financial crisis recovery. Rates saw a gradual increase pre-pandemic but were slashed to near-zero in 2020 to mitigate the economic impact of COVID-19. As the UK economy started recovering in 2021-2022, and inflationary pressures mounted, the Bank began increasing rates to control rising inflation. Then, from 2024, the Bank of England started to cut rates again as the battle against inflation was considered to have been largely won.

The Bank Rate ended 2022 at 3.50%, up with the 0.25% end-2021 value and above the reading of 0.50% a decade earlier. For reference, the average Bank Rate in Major Economies was 3.50% at the end of 2022. For more interest rate information, visit our dedicated page.

United Kingdom Interest Rate Chart

Note: This chart displays Policy Interest Rate (%) for United Kingdom from 2014 to 2024.
Source: Macrobond.

United Kingdom Interest Rate Data

2020 2021 2022 2023 2024
Bank Rate (%, eop) 0.10 0.25 3.50 5.25 4.75
SONIA Rate (%, eop) 0.04 0.19 3.43 5.19 4.70
10-Year Gilt Yield (%, eop) 0.20 0.97 3.67 3.54 4.57

Central Bank decreases rate in May

Latest bank decision: On 8 May, the Central Bank voted by a majority to reduce the Bank Rate by 0.25% points to 4.25%.

Monetary policy drivers: One key factor influencing the decision was recent disinflation progress, with CPI inflation falling to 2.6% in March from 2.8% in February, moving closer to the Central Bank’s 2.0% target. Moreover, the Bank expects a “significant” slowdown in pay growth later this year, which should cap price pressures ahead. Finally, the Bank commented that since the middle of 2024 the labor market had loosened and underlying GDP growth had slowed, further justifying a rate cut.

More cuts to come: The Central Bank suggested that future rate cuts would be “gradual and careful”. Our Consensus is currently for around 50 basis points of extra cuts between now and end-2025, with forecasts ranging from zero to 150 basis points.

Panelist insight: On the outlook, Nomura analysts said: “We continue to expect the Bank to cut rates three times more, at a quarterly pace, until reaching 3.50% (upper end of what we think is the neutral range) by early 2026. Dissents for unchanged policy and reduced uncertainty should the mooted UK-US trade deal go through probably lower the risk of a back-to-back rate cut at next month’s meeting.” ING’s James Smith said: “We still think the path of least resistance is for the Bank to keep cutting rates once per quarter this year, which would see its next move in August. That said, we wouldn’t fully rule out the BoE moving faster at some point. The major uncertainty surrounding April’s services inflation figure […] was, we suspect, a key factor keeping the Bank more cautious.”

Consensus Forecasts and Projections for the next ten years

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects British interest rate projections for the next ten years from a panel of 37 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for British interest rate.

Download one of our sample reports to visualize what a Consensus Forecast is and see our British interest rate projections.

Want to get access to the full dataset of British interest rate forecasts? Send an email to info@focus-economics.com.

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