There are many different interest rates in the UK but one of the most important is the official bank rate (sometimes also referred to as the Bank of England base rate). This is the rate at which the Bank of England lends to banks. It has a direct influence on interest rates in the domestic banking system and as such the bank rate is a reference level for the rates which the London clearing banks pay on deposits and charge on loans.
Changes to the bank rate are recommended by the Monetary Policy Committee (MPC), which meets once a month to consider changes to the bank rate (more info on the MPC).
Further information on the official bank rate can be found here at the BoE web site.
Over the years this interest rate has been referred to variously as the Bank Rate, Minimum Lending Rate, Minimum Band 1 Dealing Rate, Repo Rate and, today, the Official Bank Rate. But we can regard them all as essentially the same thing. And we can concatenate these rates over the years to create a continuous record of base rates from 1694.
For reference the rates for different periods are shown in the following table.
|1694 – 1972||Bank Rate|
|1972 – 1981||Minimum Lending Rate|
|1981 – 1986||Minimum Band 1 Dealing Rate|
|1997 – 2005||Repo Rate|
|2006 -||Official Bank Rate|
The following chart plots this continuous times series of base rate levels from 1694. [NB. The X-axis is not a uniform scale.]
The following table gives some statistics by century on this bank rate data from 1694.
The Count row gives the number of times the bank rate was changed in each respective century.
Until 1973 the average bank rate had been around 4%, but then shot up to levels not seen before – reaching a maximum of 17% in 1980.
Volatility (measured by standard deviation) of the bank rate also increased at the same time to levels not seen before.
The bank rate we have today, 0.5%, can be clearly seen to be unprecedented. Previously, the lowest rates seen had been 2% in the 18th and 19th centuries.