What we are doing about the rising cost of living

The next decision on interest rates will be announced on Thursday 7 November 2024. We publish the dates of all our forthcoming decisions on our website.

We have already begun to lower interest rates. If inflationary pressures continue to ease, we should be able to further reduce interest rates gradually. But it is vital we make sure inflation stays low. So we need to be careful not to cut rates too quickly or by too much.

We can’t say exactly what our interest rates will be in the future because it depends on how the economy is doing and what is likely to happen to inflation.

Read more in our explainer on why are interest rates high and how quickly might they fall?

A group of nine people who make up the Bank of England’s Monetary Policy Committee (MPC) decides what the UK’s main interest rate (Bank Rate) is. It meets every six weeks to look closely at how the UK economy is doing.

Before it decides on interest rates, it assesses the state of the economy now and what it’s likely to be in the coming months. The things they look at include:

• how fast prices are rising
• how the economy is growing
• how many people are unemployed

Although inflation is now close to our 2% target, prices rose more quickly than usual over much of the past three years. There are three main reasons for this.

The first reason was the Covid pandemic. While people had to stay at home, they started to buy more goods rather than services. But the people selling these goods have had problems getting enough of them to sell to customers. That led to higher prices – particularly for goods imported from abroad. 

The second reason was Russia’s invasion of Ukraine, which led to large increases in the price of gas. It also pushed up the price of food. Poor harvests in other countries made the situation worse.

The third reason was a big fall in the number of people available to work. That was linked to the Covid pandemic. It’s meant that employers have had to offer higher wages to attract job applicants. Many businesses have had to increase their prices to cover those costs. That includes firms in the services sector, where wages are the largest part of business costs.