Current Bank Rate 4%
Next due: 18 December 2025
Current inflation rate 3.8%
Target: 2%
The rate of inflation remains above the 2% target, but we think it will fall from here
If that happens, interest rates will probably continue to fall gradually
We will do what is necessary to get inflation back to 2%
6 November 2025
The Monetary Policy Committee (MPC) is responsible for maintaining monetary stability by working to keep inflation low and stable. It meets eight times a year to decide what interest rate is needed to return to, or keep it at, the 2% target over time.
Governor Andrew Bailey explains the reasons behind our latest decision, including these key points:
- Today we held interest rates at 4%. Since August last year, we have been able to cut rates five times.
- Inflation has come down a long way from its peak three years ago, but it remains too high.
- In our decision to hold interest rates today, we have balanced the risk that above-target inflation becomes more persistent against the risk that demand in the economy is weakening, which might cause inflation to fall too low.
- If inflation stays on track, we expect to be able to gradually cut rates further.
What are interest rates?
Interest is what you pay for borrowing money and what banks pay you for saving money with them.
If you are borrowing money, the interest rate (or lending rate) is the amount you are charged for doing so. If you are a saver, the interest rate (or savings rate) tells you how much money will be paid into your account.
Both are expressed as a percentage of the total amount you have borrowed or saved.
So, if you borrowed £100 with a 1% lending rate, you’d have to pay £101 a year later. If you put £100 into a savings account with a 1% interest rate, you’d have £101 a year later.
What is Bank Rate?
It is the core interest rate in the UK and it is our job to set it.
It is the rate of interest we pay to commercial banks, building societies and financial institutions that hold money with us. It is also the rate we charge on loans we may make to them. It, therefore, affects their own lending and savings rates. For example, when we raise the Bank Rate, banks will usually increase how much they charge their customers on loans and the interest they offer on savings. And the reverse if we lower it.
Bank Rate over time
Official Bank Rate history data from 1694How do interest rates affect inflation?
Interest rates influence how much people spend, and that affects how shops and businesses set their prices.
Higher interest rates mean higher payments on many mortgages and loans, meaning people must spend more on them and less on other things. Saving becomes more attractive because the returns are higher and it becomes more expensive to take out a loan. These things all discourage consumers and businesses from spending.
When customers spend less, businesses are less willing or able to raise their prices. When prices don’t go up so quickly, inflation falls.
Lower interest rates can have the reverse effect. If payments on mortgages and loans go down, people will have more money to spend on other things. Savers will get a smaller return and, therefore, may feel less motivated to put their money away. It will be also cheaper for potential borrowers to take out a loan – and use that money to make big purchases.
All of these factors encourage spending. When people spend more, this means demand is high. And when demand is high, businesses often raise their prices, pushing up inflation.
Monetary Policy Committee announcements
This page was last updated 06 November 2025