Base rate

The base rate, or base interest rate, is the interest rate that a central bank – like the Bank of England or Federal Reserve – will charge to lend money to commercial banks. Adjusting the base rate helps a central bank regulate the economy by encouraging or discouraging spending as required.

Bank of England base rate explained

The Bank of England base rate, also known as the Official Bank Rate, is the interest rate the Bank of England (BoE) charges other banks for secured overnight lending. This affects what other banks can charge their own customers. Controlling bank rates helps the British government enact monetary policy. Interest rates are generally lowered in order to stimulate the economy and raised to prevent excessive spending. The base rate is set by the BoE’s Monetary Policy Committee and reached an all-time low of 0.1% on 19 March 2020 as a reaction to the onset of the COVID-19 pandemic.

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