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United Kingdom Interest Rate

United Kingdom Interest Rate

Bank Rate in United Kingdom

The Bank of England's policy rate from 2013 to 2022 was initially maintained at historically low levels to support post-financial crisis recovery. The 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.

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 2023.
Source: Bank of England.

United Kingdom Interest Rate Data

2018 2019 2020 2021 2022
Bank Rate (%, eop) 0.75 0.75 0.10 0.25 3.50
SONIA Rate (%, eop) 0.70 0.71 0.04 0.19 3.43
10-Year Gilt Yield (%, eop) 1.27 0.82 0.20 0.97 3.67

Bank of England keeps rates unchanged in February

On 1 February, the Bank of England (BOE) left the bank rate at 5.25%, following 515 basis points of hikes since late 2021 through to August 2023. Market analysts were expecting a hold.

The decision not to hike further was driven by sustained falls in headline and core inflation in recent months, and by headline inflation coming in below the Bank’s expectations in December. Moreover, the Bank highlighted easing wage growth recently and expectations of a rise in unemployment going forward. On the flipside, with headline and core inflation still double the Bank’s 2.0% target, it was premature to begin cutting rates.

In its communiqué, the Bank reiterated that monetary policy would “need to be restrictive for an extended period of time”, but dropped any mention of further rate increases. This is aligned with our panelists, none of whom see more monetary tightening. Our Consensus is for the bank rate to decline by close to 90 basis points from its current level by end-2024, thus remaining elevated compared to pre-pandemic levels. There is a 225 basis-point spread among panelists over the end-2024 rate outlook.

On the outlook, Berenberg’s Kallum Pickering said: “At the next meeting in March, further disinflation should persuade the remaining hawks to drop their preference for further hikes. At the May meeting, which will include a fresh set of forecasts, the BoE should be able to send a clearer signal for the timing of the first cut. While we continue to expect that to happen in June, if a larger minority of policymakers decide that cuts are need by March already, the risks would skew to a first cut in May. We continue to look for 125bp of cuts in 2024.” In contrast, UniCredit’s Daniel Vernazza expects monetary easing to begin later: “Rate cuts are coming, but probably not quite so soon or as fast as financial markets had expected. We continue to expect the first rate cut in September, three months later than our forecast for cuts by the Fed and the ECB, reflecting stickier wage growth and services inflation in the UK.”

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 36 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.

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