The Bank of England has cut its benchmark interest rate by a quarter point to 0.25% to stimulate the economy following the Brexit vote. This takes borrowing costs to a fresh record low and is the first rate move since 2009.
The package also included plans to pump an additional £60bn of electronic money into the economy, extending its quantitative easing programme to £435bn. Up to £10bn in electronic cash will be created to buy corporate bonds from firms, and there is a new scheme to provide as much as £100bn of funding to banks, to boost lending to households and businesses.
We take a look at the central bank’s decisions since the global financial crisis erupted in 2007.
11 May 2007
Before the crash. Interest rates hit a six-year high of 5.5% with the fourth hike in nine months, after inflation reaches a record high of 3.1% in March.
5 July 2007
The Bank of England, under the governorship of Mervyn King, raises interest rates by a quarter point to 5.75%, citing inflation risks.
7 September 2007
The City starts to speculate that the next move in UK rates will be down, as the International Monetary Fund joins others warning of the adverse impact of financial market turbulence – the credit crunch is in its early days – on global growth.
14 September 2007
The symbolic moment when the credit crunch began in the UK. The Bank of England grants emergency funding to Northern Rock, which is nationalised soon after in February 2008.
30 November 2007
The Bank of England says it will provide £10bn in emergency funds to the UK’s commercial banks in an attempt to ward off a worsening of the credit crunch over Christmas.
6 December 2007
The Bank of England delivers its first rate cut in more than two years, reducing its base rate by a quarter of a point to 5.5%, after weaker data from the housing market and the wider economy.
11 April 2008
The Bank of England cuts interest rates by a quarter point to 5% to counter the effects of the global credit crunch on mortgage markets, which are seeing rising mortgage rates in the UK.
17 June 2008
Dearer energy bills send Britain’s annual inflation rate to a 16-year-high of 4.7%, more than twice the Bank’s 2% target; meanwhile, house prices fall at their fastest rate since the early 1990s property crash.
15 September 2008
The Bank of England injects £20bn of cash into short-term money markets to allow banks to lend to each other after the collapse of US investment bank Lehman Brothers.
8 October 2008
The Bank of England cuts interest rates by half a point to 4.5%, just hours after the government’s decision to part-nationalise Britain’s collapsing banks.
6 November 2008
The Bank of England shocks the country by slashing 1.5 percentage points off interest rates to 3%, the largest cut since it was granted independence in 1997.
4 December 2008
The credit crunch is in full spate and the Bank of England reduces interest rates by a full percentage point to 2%, as part of a wave of central bank rate reductions around the world.
23 December 2008
The Bank underestimated the severity of the financial crisis, according to outgoing deputy governor Sir John Gieve.
8 January 2009
The Bank cuts rates by half a point to 1.5% to fight the economic slump (the UK economy is declared to be officially in recession a few weeks later).
5 February 2009
Interest rates cut by half a point to 1%.
5 March 2009
The Bank cuts interest rates by half a point to 0.5%, the lowest since the central bank was founded in 1694, and unveils quantitative easing: £75bn of newly created money will be used to buy government and corporate bonds to drag the economy out of recession (because financial institutions, who sold the bonds to the Bank, are expected to reinvest the proceeds elsewhere in the economy).
7 May 2009
The Bank surprises the City with a £50bn boost to QE to £125bn, and warns that the world economy remains in deep recession.
6 August 2009
Bank of England raises QE by £50bn to £175bn, more than expected. The Bank says the UK recession has been “deeper than previously thought”.
6 November 2009
The rate-setting monetary policy committee extends QE by £25bn to £200bn; minutes of the meeting show a three-way split on the MPC.
20 October 2010
The Bank of England rate-setting committee split three ways: Andrew Sentance calls for a rate hike and Adam Posen votes for a £50bn boost to QE; a growing number of members see a greater need for more QE.
2 February 2011
Deputy governor Charles Bean warns that the Bank may have to put up rates if the commodity price boom continues.
15 February 2011
The prospect of a rate hike increases after inflation hits 4%, the highest in more than two years and twice the Bank’s target.
17 August 2011
Bank of England hawks (ie in favour of raising interest rates) Spencer Dale and Martin Weale abandon calls to raise interest rates amid wild swings on global stock markets, the growing eurozone crisis and Britain’s ongoing economic woes.
6 October 2011
Faced with warnings of a double-dip UK recession and a eurozone crisis, the Bank shrugs off fears of high inflation and boosts QE by £75bn to £275bn.
9 February 2012
The Bank pumps another £50bn into the economy, taking the economic stimulus to £325bn. The move is heavily criticised by groups representing savers and pensioners because it depresses savings rates.
5 July 2012
Faced with a prolonged double-dip recession, the Bank of England boosts QE by £50bn to £375bn while central banks in the eurozone and China cut interest rates.
23 August 2012
The Bank admits that Britain’s richest households have gained the most from its £375bn QE programme since early 2009.
19 June 2013
7 August 2013
The Bank’s new governor Mark Carney signals that ultra-low interest rates will last until well after the 2015 general election. He introduces “forward guidance”: rates will only be raised if the unemployment rate reaches 7%, from 7.8%, which means around 750,000 more jobs. The Bank reckons this will take three years. It doesn’t.
10 December 2013
Carney says the UK economy needs sustained low interest rates to spur growth.
23 July 2014
Minutes of the monthly meeting show that policymakers are growing uneasy at leaving rates at their record low – some see little risk in a “small rise”.
25 September 2014
New deputy governor Minouche Shafik says interest rate rises hinge on whether pay rises but productivity – output per hour worked – does not.
28 October 2014
Comments from another deputy governor, Jon Cunliffe, reinforce the market view that rates will remain at 0.5% until at least mid-2016.
17 December 2014
The Bank’s monetary policy committee remains divided over a interest rate rise. Martin Weale and Ian McCafferty have voted for a hike since August.
21 January 2015
26 January 2015
Markets don’t expect a rate hike until mid-2016, but one of the Bank’s nine rate-setters, Kristin Forbes, says borrowing costs could rise sooner than thought if inflation picks up.
17 July 2015
Carney alerts markets that interest rates could go up around the turn of the year, with price pressures expected to pick up in the months ahead.
5 November 2015
The Bank signals that rates are likely to remain on hold well into 2016 after fresh signs of a UK and global slowdown, and suggests it could tighten lending rules to keep a lid on house prices.
4 February 2016
The prospect of a rate rise recedes further after the Bank cuts its forecasts for growth and inflation forecasts, but Carney says rates are “more likely than not” to go up over the next two years.
3 March 2016
Economists predict another year of record low interest rates after Britain’s dominant services sector suffers a sharp slowdown; savers have lost an estimated £160bn in the last seven years.
22 April 2016
Jan Vlieghe, one of the Bank’s nine rate setters, floats the possibility of interest rates being cut below zero.
12 May 2016
Carney warns for the first time that a Brexit vote could push Britain into recession. He also warns that it could knock the pound sharply lower, stoke inflation and raise unemployment, leaving the Bank with a difficult balancing act in its interest rate decisions.
24 June 2016
Carney steps in the morning after the referendum to calm financial market fears, saying that the Bank and Treasury are “well prepared” and will take any measures needed to secure economic and financial stability.
30 June 2016
Carney says “some monetary policy easing will likely be required over the summer” as he says UK economy is already showing signs of strain. He also highlights broader picture of “economic post-traumatic stress disorder”.
5 July 2016
The Bank of England releases up to £150bn of lending to households and businesses by relaxing restrictions on bank capital (their safety buffers), as it warns on financial stability.
4 August 2016
Interest rates cut to 0.25%, a new record low, as the Bank of England unveils an expansion to the QE programme.
