official bank rate
{{Short description|Bank of England rate for 1-day loans}}
{{About|the specific rate in the United Kingdom ||Bank rate}}
{{expert|finance and investment|talk=Expert attention needed|date=July 2022}}
{{Use British English|date=March 2021}}
{{Use dmy dates|date=March 2021}}
In the United Kingdom, the official bank rate is the rate that the Bank of England charges banks and financial institutions for loans with a maturity of 1 day. It is the Bank of England's key interest rate for enacting monetary policy.{{cite web| url= http://www.bankofengland.co.uk/monetarypolicy/how.htm |title= How Monetary Policy Works}} It is more analogous to the US discount rate than to the federal funds rate. The security for the lending can be any of a list of eligible securities (commonly gilts) and the transactions are overnight repurchase agreements. Changes are recommended by the Monetary Policy Committee and enacted by the Governor.
On 2 August 2018 the Bank of England base rate was increased to 0.75%,{{cite web| url= http://www.bankofengland.co.uk/boeapps/iadb/Repo.asp |agency= Bank of England Statistical Interactive Database |title= Interest & Exchange Rates {{!}} Official Bank Rate History |website= BankOfEngland.co.uk }} but then cut to 0.25% on 11 March 2020,{{cite web|date=11 March 2020|title=UK interest rates cut in emergency move|url=https://www.bbc.co.uk/news/business-51831004|access-date=13 March 2020|publisher=BBC News}} and shortly thereafter to an all-time low of 0.1% on 19 March, as emergency measures during the COVID-19 pandemic.{{cite web|url=https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2020/monetary-policy-summary-for-the-special-monetary-policy-committee-meeting-on-19-march-2020|title=Monetary Policy Summary for the special Monetary Policy Committee meeting on 19 March 2020|date=19 March 2020|publisher=Bank of England|access-date=19 March 2020}} On 15 December 2021, the Monetary Policy Committee voted 8-1 to increase the bank rate to 0.25%, and subsequently increased it thirteen more times to 5.25% on 02 August 2023.{{Cite web |date=2024-08-01 |title=Interest rates and Bank Rate |url=https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate |access-date=2024-08-21 |website=www.bankofengland.co.uk |language=en}} As of 21 August 2024 the bank rate sits at 5%.{{Cite web |date=2024-08-01 |title=Interest rates and Bank Rate |url=https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate |access-date=2024-08-21 |website=www.bankofengland.co.uk |language=en}}
History
The official bank rate has existed in various forms since 1694 and has ranged from 0.1% to 17%. The name and meaning (depositing vs lending) of this key interest rate has changed over the years. The current name, Official Bank Rate, was introduced in 2006{{cite web|title=Further details about wholesale - baserate data|url=https://www.bankofengland.co.uk/statistics/details/further-details-about-wholesale-baserate-data|website=Bank of England}} and replaced the previous Repo Rate (repo is short for repurchase agreement) in use since 1997. Previously (between 1981 and 1997) the name was Minimum Band 1 Dealing Rate and prior to that the Minimum Lending Rate.
