Interest rate rise mapped: How cost of living has spiralled out of control | Personal Finance | Finance
A series of global crises have pushed the cost of living up for everyone with prices for goods and services rising sharply. The war in Ukraine and the post-pandemic recovery have put pressure on the economy and British households.
What is the Bank of England interest rate?
The Bank of England interest rate is the amount people pay for borrowing money and how much they receive for their savings.
The Monetary Policy Committee changes the rate depending on how the economy is performing and its role is to keep inflation down.
When the interest rate changes, banks normally update their own rates on money they have borrowed or savings accounts.
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A change in interest rates impacts how much people spend and how much things cost.
The Bank of England interest rate fell to 0.1 percent in 2020 in response to the pandemic and remained stable until December 2021.
Since then, the rate has increased as the world has moved out of lockdown and into a period of recovery – and now stands at 1.0 percent.
The last time the interest rate was above one percent was in 2009 when Gordon Brown was prime minister after the financial crash.
The war in Ukraine has contributed to this as international embargos on Russian oil and gas are pushing energy prices up globally.
To help people get through the cost of living crisis, the Government is offering payments to the most vulnerable.
In May Rishi Sunak announced a list of people who were eligible for payouts including those claiming benefits and pensioners who receive Winter Fuel Payments.
The Chancellor is hoping the payments and change in interest rates will lessen the impact of the UK’s high inflation.
What is the picture around the world?
Britain is not alone in facing the cost of living crisis and countries around the world are also affected.
Germany‘s inflation rate jumped to 7.9 percent in May – the highest since reunification.
The United States is in more trouble as inflation hit 8.6 percent last month and is one of the highest in the G20.
