Interest Rates and Monetary Policy: Data on interest rates from the UK, eurozone and the US; a summary of the Bank of England’s and international, quantitative easing policy.Jump to full report >>
Central banks around the world cut interest rates sharply during the 2007-2009 financial crisis. Rates have stayed at historic lows since then, close to or below 0% in most developed economies.
The Bank of England’s Monetary Policy Committee (MPC) voted 7-2 to leave interest rates unchanged at 0.5% at its May policy meeting. In November, the MPC raised interest rates for the first interest rate increase in more than a decade.
The fall in the value of the pound since early 2016 and, particularly, following the Brexit vote in June 2016, pushed up inflation to around 3% in the second half of 2017 – above the MPC’s 2% target. It has since eased to 2.5% in March. Despite subdued economic growth in recent quarters, the MPC believes that there is little spare capacity in the economy. This means that to bring inflation down to its target, the MPC has stated that a few more rate increases are likely at some point, possibly later this year.
The MPC’s quantitative easing (QE) programme, where the Bank creates new money to buy financial assets, remains active and unchanged. QE now totals £445 billion of assets, £435 billion of which are government bonds and £10 billion of commercial debt.
At its April 2018 policy meeting, the European Central Bank left its main interest rate unchanged at 0.0%. It also left unchanged its quantitative easing programme – whereby it purchases assets (mostly government bonds of Eurozone countries) in an attempt to stimulate the economy – at €30 billion per month until September 2018, or longer “if necessary”.
At its two-day policy meeting ending on 2 May, the US Federal Reserve left interest rates unchanged at a range of 1.50-1.75%. Rates have been increased gradually from 0-0.25% since December 2015 against a backdrop of jobs growth and steady economic growth. More rates rises are expected later this year.