Bank of England..

How Often Does the Bank of England Set Interest Rates?

The Bank of England's Monetary Policy Committee meets regularly to decide whether the Bank Rate should be increased, reduced or left unchanged. The Bank Rate influences mortgage rates, savings returns and the cost of borrowing for individuals and businesses. Although commercial lenders set their own rates, decisions made by the Bank of England can have a significant effect throughout the economy.

Why Was the Meeting Schedule Changed?

Until 2017, the Monetary Policy Committee was required to meet at least once a month. Reforms introduced by the Bank of England and the Financial Services Act 2016 changed this requirement to at least eight meetings each year, with no more than ten weeks between meetings. The change followed an independent review by former US Federal Reserve Governor Kevin Warsh of the transparency and effectiveness of the Bank's monetary policy procedures. The intention was not simply to reduce the number of meetings. The reforms were designed to improve the quality of decision-making, strengthen accountability and allow economic reports, meeting minutes and interest-rate announcements to be published more efficiently.

How Does the Present System Work?

The Monetary Policy Committee now announces its decisions eight times a year, approximately once every six weeks. Before each announcement, committee members examine information including:

• Current and forecast inflation
• Wage growth and employment
• Consumer spending and business investment
• Energy and commodity prices
• The strength of the wider UK economy
• International economic and political developments

The committee then votes on whether Bank Rate should rise, fall or remain unchanged. A summary of the decision and the individual votes of committee members is published following the meeting. More detailed Monetary Policy Reports are normally issued four times a year, setting out the Bank's economic forecasts and explaining the evidence behind its decisions.

Does Having Fewer Meetings Create a Risk?

Critics of the change argued that less frequent scheduled meetings might reduce the Bank's ability to react quickly to unexpected economic developments. Interest-rate expectations can affect currency values, government bonds and financial markets. A delay in responding to a sudden increase in inflation or a financial crisis could therefore have wider consequences. However, the Bank is not prevented from acting between scheduled announcements. The Monetary Policy Committee can arrange an additional meeting when exceptional circumstances require an urgent decision.

Why Transparency Matters

Interest-rate decisions can have an immediate effect on mortgage holders, savers, landlords, businesses and investors. It is therefore important that the Bank explains not only what it has decided but also why it reached that decision. The publication of voting records and meeting minutes allows the public and financial markets to see whether committee members agree about the outlook or are divided over the future direction of rates. For example, some members may believe inflation remains too high and vote for an increase, while others may be more concerned about weak growth and vote for a reduction. These differences can indicate how the balance of opinion within the committee is changing.

When Are Interest-Rate Decisions Announced?

The Bank of England publishes its Monetary Policy Committee announcement dates in advance. Decisions, voting records and meeting minutes are usually released at midday on the scheduled date. There are normally eight announcements during the year, but the precise dates can vary. Borrowers and savers should check the Bank of England's current schedule rather than assuming that a decision will be made during a particular week or month.

What Does an Interest-Rate Decision Mean for You?

An increase in the Bank Rate can result in higher repayments for people with tracker or variable-rate mortgages. Fixed-rate mortgage customers are usually protected until their existing deal ends, although the rates offered when they remortgage may change. Savers may benefit from improved returns when rates rise, but banks and building societies are not required to pass on the full increase. When the Bank Rate falls, some borrowers may see their payments decrease, while the returns available on savings accounts may also decline. Anyone approaching the end of a fixed-rate mortgage should review their options in advance. Those experiencing difficulty meeting mortgage or loan payments should contact their lender as early as possible.

Getting Advice

A regulated mortgage broker or financial adviser can provide guidance about mortgages, savings and other financial products. Where a disagreement involves mortgage advice, financial mis-selling, repossession proceedings, or the conduct of a lender, a solicitor experienced in banking, property or financial services disputes may be able to advise on the available legal options