Current Bank Rate 3.75%
Next due: 30 July 2026
Current inflation rate 2.8%
Target: 2%
Energy prices have fallen but are still high due to war in the Middle East
Inflation has fallen to 2.8% but we expect it to rise this year
We need to make sure higher energy costs don't lead to sustained higher inflation
Published on 18 June 2026
The Monetary Policy Committee is responsible for maintaining monetary stability by keeping inflation low and stable. It meets eight times a year to decide what level of Bank Rate is needed to return inflation to – or keep it at – the 2% target over time.
Key points:
- we have held Bank Rate at 3.75%
- war in the Middle East has disrupted the transportation and supply of energy, raising its price and pushing up households’ motor fuel costs and utility bills; prices have fallen since the initial spike but the war makes it hard to predict what is going to happen with them
- inflation has fallen to 2.8% but we expect it to go up again as the energy price rises have their knock-on effects; higher bills could force businesses to increase their own prices to cover the cost; workers may ask for higher wages as their bills have also gone up; the impact on the economy and inflation will depend on how long energy prices stay raised
- demand for workers isn’t very high right now, so employers may feel less pressure to increase salaries; and interest rates are still higher than before the war broke out; this could contain the effects of the energy price rises and help reduce inflation over time
- monetary policy cannot affect global energy prices; our job is to make sure that higher inflation does not persist and have long-lasting effects on the economy
- we are monitoring the situation very closely; whatever happens, we’ll make sure that inflation gets back to the target in the medium term
Find out more
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 18 June 2026