Inflation and interest rates

Find out about inflation and how it is linked to interest rates.

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What is inflation?

Inflation is the term we use to describe rising prices. How quickly prices go up is called the rate of inflation.

What will happen to inflation?

We expect inflation to be lower and more stable than it has been over the past two years.

What are interest rates?

Interest is the cost of borrowing money or the reward for saving.

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Why are interest rates high and how quickly might they fall?

We need to make sure inflation stays low. So we need to be careful not to cut rates too quickly or by too much.

How do higher interest rates help to lower inflation?

Interest rates and inflation are closely linked. Higher rates will help to bring down inflation. But how exactly?

How have prices changed over time?

The prices of some things we buy have gone up over time. But for others, prices have gone down!

Why is your mortgage rate higher than Bank Rate?

The interest rate on your mortgage is usually much higher than Bank Rate.

What is deflation?

Falling prices are not always cause for celebration.

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