Why does the Bank of England review interest rates?
The Bank of England (BoE) reviews its base rate, eight times a year, as a lever to control inflation but also to stimulate growth in the UK economy.
The government sets an inflation target of 2% for the bank to meet. This is seen as a healthy rate of price rises for an economy.
The theory is that increasing interest rates encourages people to save money and not spend it, which in turn slows inflation.
Conversely, lowering interest rates reduces the cost of borrowing and can encourage people to spend their money rather than save it, which can stimulate growth in the economy.
When is the MPC’s interest rates decision announced?
The MPC will confirm its UK interest rate decision at midday (12pm) tomorrow (18 December).
Stay with us for live reaction to the decision and what it may mean for your finances.
Bank of England’s MPC digesting economic data
Good afternoon, and welcome to our live coverage ahead of tomorrow’s announcement from the Monetary Policy Committee (MPC) on whether it will raise, hold or cut UK interest rates.
The meeting follows a string of macroeconomic news for the UK.
Data published by the Office for National Statistics (ONS) today (17 December) revealed that inflation as measured by the Consumer Prices Index (CPI) slowed to 3.2% in the 12 months to November. This is down from 3.6% in the 12 months to October.
Labour market figures released yesterday (16 December) showed UK unemployment rose to an almost five-year high of 5.1% in the three months to October.
The latest GDP figures from the ONS show the UK economy unexpectedly shrank in the three months to October, falling by 0.1%.
All of this will be keenly reviewed by MPC, who will then decide on where to set interest rates. A stagnant economy, rising unemployment and slowing inflation all suggest a base rate cut is on the way, despite inflation still running ahead of the BoE’s 2% target.
Follow our preview and reaction coverage of the MPC’s decision in this live report.
