On 15 December the Bank of England announced that their interest rate was being raised to 3.5%, this is a 0.5% increase from what it was previously in November 2022.
The Bank of England increasing their interest rate will have an impact on other rates in the UK which can affect loans, mortgages or savings accounts.
The cause for this increase is due to the living crisis the UK is currently going through. Over the past couple of months, inflation has been getting higher and higher. To prevent it from getting higher and bring it down, the Bank of England has increased its interest rates.
Overall, we know that if we lower interest rates, this tends to increase spending and if we raise rates this tends to reduce spending. So, to meet our inflation target, we need to judge how much people intend to save and spend given the current interest rates. For example, if people start spending too little, that will reduce business and cause people to lose their jobs. In that case we may cut interest rates to help support spending. Bank of England