Interest rates: why central banks raise or cut them
Why central banks raise, cut or hold interest rates, and how the effects travel through markets to mortgages, savings, credit and businesses. The Bank of England is the UK example. Trackers, variable rates, existing fixes and new fixed offers run on different clocks. Conventional gilt coupons remain fixed while yields affect new borrowing and refinancing. Latest policy example: 17 September 2026, checked 5 October 2026. Educational explanation; no prediction of the next decision.
Educational documentary. Not financial or investment advice.
In these topics
Chapters
- One announcement, different outcomes
- What the central bank sets
- Why raise, cut or hold?
- A short UK rate history
- Markets move before the announcement
- Trackers and variable mortgages
- Existing fixes and new fixed deals
- Savings: check the actual account
- Credit cards and other loans
- Businesses, investment and hiring
- Government borrowing and the takeaway
Sources and credits
Photo credits (Wikimedia Commons)
- Bank of England, Threadneedle Street, London — front exterior photographed 11 October 2021 (building illustration, not a rate-decision event): Michael, Public domain - https://commons.wikimedia.org/wiki/File%3ABank_of_England_Facade.jpg
Primary sources
- Bank of England Quarterly Bulletin, About a rate of (general) interest: how monetary policy transmits (Burr and Willems), 12 July 2024.
- Bank of England, Bank Rate increased to 5.25%, 3 August 2023.
- Bank of England, Bank Rate reduced to 5%, 1 August 2024.
- Bank of England, Bank Rate maintained at 3.75%, 17 September 2026.
- Bank of England, Bank Rate increased to 0.25%, 16 December 2021.
Not regulated financial advice.