Bank of England raises Bank Rate to 5.25%, highest since 2008

On 3 August 2023, the Bank of England's Monetary Policy Committee, the panel that sets UK interest rates, raised Bank Rate by a quarter point from 5% to 5.25%. It was the 14th consecutive increase and took borrowing costs to their highest level since early 2008.

The rises began in December 2021, when Bank Rate went from a record low of 0.1% to 0.25%. Inflation then surged because of energy prices after Russia's invasion of Ukraine, supply disruption and a tight labour market. Consumer price inflation peaked above 11% in late 2022 and was still well above the Bank's 2% target in summer 2023.

The decision pushed up mortgage and loan costs for households and businesses, particularly for homeowners coming off cheap fixed-rate deals. Savers, however, saw better returns. The Bank said it would keep rates high enough for long enough to bring inflation back to target. It held Bank Rate at 5.25% from September 2023, and this level became the peak of the tightening cycle before cuts began in 2024.