UK bank rate changes since 1694

A previous article looked at the history of the official bank rate since 1694.

Here we will analyse all the discrete changes made to the bank rate since 1694.

Since 1694 the Bank of England has made 828 changes to the bank rate. Changes to the bank rate today 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).

The following chart plots all the changes to the bank rate from 1694. The size of each respective change is shown on the Y-axis. (NB. the Y-axis is truncated at plus and minus 3 for legibility; in 1914 the rate did see changes of +4 and -4.)

BoE bank rate changes [1694-2016]

As can be seen, until the beginning of the 20th century the great majority of rate changes were +/- 0.5 and +/- 1. And also the balance of the size of positive and negative rate changes was roughly equal.

Towards the end of the 20th century the Bank started experimenting with larger and smaller increments of change. And the balance of rate changes also changed: periods of small negative changes would be interrupted by larger positive rate adjustments.

In 1982 the Bank began a cautious period of frequent rate reductions of just 0.125 (the smallest rate reduction up to this time). The last time the bank rate was reduced by such a small amount was in 1989.

The frequency distribution of size of rate changes is shown in the following chart.

Distribution of BoE bank rate changes [1694-2016]

As can be seen, the most common rate change has been a reduction of half a percentage point. (Since 1694 33% of all rate changes have been for -0.5.) After that the most frequent rate change was plus one percentage point.

The above chart supports the (well-known) observation that rates are reduced cautiously with small increments and increased with more aggressive, larger increments.

The following chart breaks this frequency distribution down by century.

Distribution of BoE bank rate changes (by century) [1694-2016]

The above chart supports the previous observation that, whereas in the 19th century the Bank restricted its changes to a narrow band of increments, in the 20th century the size of the rate changes were more dispersed.

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