Official bank rate

The official bank rate (also called the Bank of England base rate[1] or BOEBR) is the interest rate that the Bank of England charges Banks for secured overnight lending. It is the British Government's key interest rate for enacting monetary policy.[2] 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 are transacted as 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%,[3] but then cut back to 0.25% on 11 March 2020 as an emergency measure in the wake of Covid-19 pandemic.[4] This was further cut to an all time low of 0.1% on the 19 March 2020.[5]

History

The official bank rate has existed in various forms since 1694 and has ranged from 0.1% to 17%.[6] The name of this key interest rate has changed over the years. The current name "Official Bank Rate" was introduced in 2006[6] and replaced the previous title "Repo Rate" (repo is short for repurchase agreement) in 1997. Previously (between 1981 and 1997) the title was "Minimum Band 1 Dealing Rate" and prior to that the "Minimum Lending Rate".

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See also

References
  1. "Halifax: A to Z of Mortgages".
  2. "How Monetary Policy Works".
  3. "Interest & Exchange Rates | Official Bank Rate History". BankOfEngland.co.uk. Bank of England Statistical Interactive Database.
  4. "UK interest rates cut in emergency move". BBC News. 11 March 2020. Retrieved 13 March 2020.
  5. "Monetary Policy Summary for the special Monetary Policy Committee meeting on 19 March 2020". Bank of England. 19 March 2020. Retrieved 19 March 2020.
  6. "CHANGES IN BANK RATE, MINIMUM LENDING RATE, MINIMUM BAND 1 DEALING RATE, REPO RATE AND BANK RATE" (PDF).


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