Interest rates rise to 0.75%

Bank of England increases interest rate to 0.75% - the highest since the start of the pandemic

The Bank of England
(Image credit: Getty images)

The Bank of England has raised interest rates to 0.75% as it warned the Ukraine conflict could see under-pressure households hit with double-digit inflation later this year.

It marks the third time in four months that the Bank has hiked rates.

The rate rise from 0.5% comes during a cost of living crisis, such as an increase in fuel and energy costs, with soaring inflation squeezing household finances.

Inflation is currently running at 5.5%, with big price increases seen at the petrol pump, in the supermarket and on many people’s energy bills. 

This is well above the Bank of England’s inflation target of 2%. The Bank believes that inflation could reach 8% in the coming months, partly due to the war in Ukraine, which is pushing up “energy and other commodity prices including food prices”. 

However, it also warned that if wholesale energy prices continue to soar, inflation could rise even further by the end of the year and potentially be “several percentage points higher” than the 7.25% peak that it forecast last month.

The Bank said: “The effects of Russia’s invasion of Ukraine would likely accentuate both the peak in inflation and the adverse impact on activity by intensifying the squeeze on household incomes.”

The Bank can raise interest rates to try and control inflation. Its Monetary Policy Committee (MPC) voted 8-1 to increase interest rates to 0.75%. The rise was widely expected by economists. However, rising mortgage costs for millions of households - as a result of higher interest rates - will hit them hard.

Annabelle Williams, personal finance specialist at the digital wealth manager Nutmeg, commented: “Although this is a small increase to interest rates which have been hovering close to record lows for many years now, many will be looking to see if the increase is passed on to consumers through higher savings rates. 

“It’s a difficult time as people are finding more of their salaries eaten up by the rising cost of living, and those with variable-rate mortgages will likely feel the impact of the rate rise almost immediately.”

According to the financial website, none of the big high-street banks passed on the last two Bank of England rate rises to savers with easy-access accounts. 

“As some of these rates are as low as 0.01%, it’s imperative savers reconsider their loyalty and switch away from these brands to something more attractive,” said Rachel Springall, finance expert at

If a saver was lucky enough to have the 0.25% increase passed onto them, it would mean receiving £50 more a year in interest based on a £20,000 investment.

There are likely to be more interest rate rises from the MPC in the near future. The consultancy Capital Economics expects the committee to raise rates to 1% at the next meeting on 5 May, and for rates to peak at 2%, probably next year.

Additional reporting by PA

Ruth Emery

Ruth Emery is contributing editor at The Money Edit. Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.