Michael Race
Business reporter

In its most recent economic projections, the Bank of England has forecast that the UK economy will flatline next year with zero growth over 2024.

The outlook for this year remains the same as previous predictions, with GDP - the main measure of economic growth - to rise by 0.5%.

“UK economic growth is slowing,” the Bank said in its inflation report.

But it is important to note that this is a forecast from the Bank and forecasts can, and tend to, change over time.

The release of today's report comes just one day less than a year since the Bank forecast that the UK was on course for its longest recession since the 1930s.

As a result of this and other misses on the inflation predictions, the Bank in July appointed former US Federal Reserve chair Ben Bernanke to lead a review of its forecasts.

Dearbail Jordan
Business reporter

The Bank of England has said it expects a sharp slowdown in inflation to 4.8% in October's figures (released this month) and further falls next year, as energy and food prices ease.

The drop means Prime Minister Rishi Sunak is likely to fulfil a pledge to halve inflation by the end of this year to around 5%.

However, the Bank has lowered its forecasts for the UK economy and expects almost zero growth from now, across the whole of next year – when there is likely to be a general election – and into 2025.

“UK economic growth is slowing,” the Bank said in its inflation report.

While inflation is easing, the Bank said it would now take a couple of years to hit its 2% target which is six months longer than a forecast it made in August.

But while the government has pledged to halve inflation, many economists have previously predicted price rises will slow naturally, as the cost of energy falls.

Image source, Getty Images

Following the Bank's decision, its Governor Andrew Bailey has said higher interest rates "are working" to curb inflation.

"But we need to see inflation continuing to fall all the way to our 2% target," he added.

"We've held rates unchanged this month, but we'll be watching closely to see if further rate increases are needed. It's much too early to be thinking about rate cuts."

Dearbail Jordan
Business reporter

Interest rates are likely to stay high for longer and could rise again despite official forecasts that the UK economy has entered a period of stagnation.

The Bank of England also said it expects a sharp slowdown in the pace of price rises in the coming months.

But governor Andrew Bailey warned that easing inflation did not mean interest rates would soon start to fall.

“It’s much too early to be thinking about rate cuts,” said Bailey.

While inflation is easing, the Bank said interest rates are likely to “need to be restrictive for an extended period of time”.

And Bailey said: “We’ll be watching closely to see if further rate increases are needed.”

As we're just hearing, UK interest rates remain unchanged at 5.25% by the Bank of England - still at a 15-year high.

The BoE said: "Whilst this means many people will be facing higher borrowing costs, it is necessary to prevent high inflation lasting a long time."

Bank holds again amid prolonged zero growthpublished at 12:05 Greenwich Mean Time 2 November 2023

12:05 GMT 2 November 2023

Faisal Islam
Economics editor

The Bank of England rate is on hold again, but it also appears that so is British economic growth. In its latest set of forecasts the Bank forecasts economic stagnation from now through next year until 2025 - a grim backdrop for the general election due in that period.

While it is not predicting recession, the Bank has notably lowered its forecasts. Just over half of the impact of the series of rate rises since late 2021 is yet to filter across the economy.

The full effect will land on households by 2025 as mortgage holders roll off low fixed rate mortgages.

The prime minister’s target to get the economy growing by the end of the year is now in doubt, even as his promise to halve inflation will be met. Inflation is set to fall very sharply when new figures are announced in a fortnight.

But this new forecast shows that after that, inflation will remain higher than previously forecast, well above target around 3%, throughout next year.

This is why the Bank has decided to make crystal clear that current levels of interest rates are here for an “extended period” of time.

There is some concern that the public will expect rates to fall alongside inflation numbers.

At this meeting there was no discussion of rate cuts at all. The Bank says it remains alert to relatively high wage rises in cash terms.

More on the expected decision from the Bank of England to leave its base rate unchanged.

Its Monetary Policy Committee, which decides the rates, voted by a margin of 6-3 to keep them at 5.25%.

Three members preferred to increase Bank Rate by 0.25 percentage points, to 5.5%.

UK interest rates have been left unchanged at 5.25% by the Bank of England in a move economists had expected.

It follows September's decision, which also left the rate unchanged.

The Bank had previously raised rates 14 times in a row to tame inflation, leading to increases in mortgage payments but also higher savings rates.

We are moments away from finding out the Bank of England’s latest interest rate decision.

The UK's official interest rate, known as the "base rate", stands at 5.25%, the highest for 15 years.

Today, it is widely expected that the Bank of England will maintain the base rate.

Stay with us for the decision, reaction and analysis by our team of experts.

The Bank of England has a target to keep inflation at 2%, but the current rate is well above that.

The traditional response to rising inflation is to put up interest rates.

This makes borrowing more expensive, and can mean some people with mortgages see their monthly payments go up.

Some saving rates also increase. When people have less money to spend, they buy fewer things, reducing the demand for goods and - in theory - slowing price rises.

Businesses also borrow less, making them less likely to create jobs, and may cut staff.

In September the Bank left rates unchanged, saying said price rises were slowing faster than expected. And economists think the Bank will do the same today.

What will the Bank’s forecasts tell us about the economy?published at 11:45 Greenwich Mean Time 2 November 2023

11:45 GMT 2 November 2023

Dharshini David
Chief economics correspondent

The Bank’s quarterly assessment of the economy and its predictions may not make for comfortable reading.

It’s already lowered its expectations for economic growth - to just 0.1% in the third quarter - as the impact of higher rates on spending becomes more pronounced across many areas.

What are the chances of it now expecting the economy to shrink, to flirt with recession? How high does it reckon unemployment could go?

How quickly it thinks inflation returns to the 2% target will also provide clues on whether interest rates have now peaked - and how quickly - or not - they may fall.

These are ultimately, just forecasts, and those can be wrong. Exactly a year ago, the Bank was predicting the longest recession since the 1930s that didn’t come to pass. The economy proved more resilient.

But its assessment will underline the consequences of deploying interest rates to fight inflation - and that the full impact of those hikes unleashed so far have yet to hit.

• Inflation, the rate at which prices are rising, stayed at 6.7% in the year to September compared with August, down from 6.8% in July
• Inflation has been falling and is now at its lowest for more than a year, but the fall has proved sticky and the rate is still more than three times higher than the Bank of England’s 2% target
• Also core inflation - a measure of price rises which strips out volatile items such as energy and food - was 6.1% in September, marginally down from 6.2% in August. This figure is watched close by the Bank of England's policymakers

• Slowing food inflation on items like milk, cheese and eggs has helped bring the overall figure down, although the pace of food price rises remains high - at 12.1% in September down from 13.6% in August
• Prime Minister Rishi Sunak pledged in January - when inflation was 10.1% - to halve price growth by the end of the year. Following September’s reading, there is still some way to go

A hold on rates would still mean pain for borrowerspublished at 11:33 Greenwich Mean Time 2 November 2023

11:33 GMT 2 November 2023

Dharshini David
Chief economics correspondent

On the surface, nothing much may change; interest rates are expected to stay on hold again. But that doesn’t mean millions of borrowers aren’t still in for a tougher time.

The majority of mortgages are on fixed rate; those holders are only exposed to the impact of the rate rises enacted over the last two years when they renew expired deals.

Over half of mortgage holders have experienced that pain, more will follow. And it’s soaring repayments (for businesses too) that ultimately puts the brakes on spending and so growth in the economy - ultimately curbing the rate at which prices rise.

Last month, one member of the Bank of England’s interest rate panel warned me that the majority of the impact of the interest rate hikes so far has yet to be felt.

That’s why the Bank may leave rates unchanged despite prices rising more than three times faster than its target rate - those rates take time to make their mark.

Image source, Getty Images

If interest rates rise today, does that automatically mean your mortgage repayments will jump? Not necessarily, according to Jane Foley, head of FX strategy at Rabobank.

It all depends on the sort of mortgage you have. "If you go back to the 1990s, everyone was on a variable rate and that was tied to the Bank of England base rate so it was an automatic rise," she told the BBC.

"But now more people are on these fixed rate packages and they are more tied to money market rates which factor in expectations of where rates will be in two years or one year etc."

Mortgage rates have soared recently because financial markets expected the Bank to keep raising interest rates to put a leash on high inflation.

So if Bank of England governor Andrew Bailey signals today that inflation is stabilising and we’re close to the peak of interest rates, financial markets might decide borrowing costs needn’t be so high.

"Money market rates may not move," says Foley. "They may even come down a bit."

Michael Race
Business reporter

High interest rates can affect people in different ways depending on their individual circumstances.

• Mortgage holders with variable or tracker mortgages, or who are looking to secure new fixed-rate deals, will be hit by higher monthly payments
• First-time home buyers may find they are priced out of the market as lending conditions become tighter
• Charges tend to be higher for some loans and credit cards that don't have fixed interest charges
• But people with savings should benefit from higher interest rates and get better returns on their money
• Higher rates could also be good news for those on the cusp of retirement, who might get a better annuity rate. This determines how much guaranteed income you get, when you swap some or all of your pension pot for a secure income. That's because providers typically buy government bonds, which will rise in line with higher interest rates
• For the government though, rises in interest rates in recent times means it has had to pay more interest on the country's debt

Economic forecast will be closely watchedpublished at 11:15 Greenwich Mean Time 2 November 2023

11:15 GMT 2 November 2023

Faisal Islam
Economics editor

At any turning point the data flies in different directions. While this month should confirm that inflation has started to reduce to more normal levels, concerns about the economy are now starting to pop up in businesses, construction and the housing market.

The slow burn impact of the significant existing rise in interest rates is hitting home.

So there is no expectation of further rate rises in the decision at noon today. However, the Bank of England’s language and new forecasts will be very closely watched.

A further downgrade on its prospects for growth is possible.

The last forecast already indicated stagnation, and not quite recession. Other European economies have shown falls in recent days.

And there are risks of further inflation from renewed tensions in the Middle East.

Interest rates are currently at a 15-year high - so let’s look at what’s happened to them over that time.

Rates were last close to today’s levels in 2008 when the global financial crisis hit and UK interest rates were dramatically cut to historically low levels.

You’ll see from the chart below that they dipped even further in 2016 after the UK voted to leave the European Union and again during the Covid pandemic, taking the rate to just 0.1%.

Rates began climbing again at the end of 2021 and accelerated the following year after Russia invaded Ukraine, which sent oil, gas and food prices higher.

When inflation is caused by factors such as global energy prices, action from the Bank of England may not be enough to slow it down.

Dearbail Jordan
Business reporter

Our reporter Dearbail Jordan is already ensconced within the depths of the Bank’s basement. Here’s what she sent us before her phone was locked away:

Good morning from the windswept Bank of England. Your slightly soggy correspondent is about to descend into the building’s recesses where I’ll be bringing you the latest interest rate decision.

Because it is a bumper announcement – as well as rates we get the Bank’s inflation report - journalists are given two hours instead of the usual one to read, ruminate and write a news story.

And we need it – the inflation report is a literal breezeblock of paper. Once signed in, we’ll be taken to the Bank’s basement where we have to lock away our phones to make sure no information leaks out before the interest rate becomes public but we do keep our (offline) laptops.

We’re then locked in a room, again, to stop leaks.

But it’s not all bad - the Bank isn’t stingy with tea and biscuits. Shortly before midday, we’ll be given the wi-fi password and you’ll be able to read our stories seconds after the clock strikes 12:00.

Then it’s off to the press conference where we journalists get to grill the Bank’s big cheeses. See you on the other side.

Interest rates are the extra money that gets charged on top of a loan. For example, if you borrow £100 from a bank and it charges a 5% interest rate, you will pay back £105.

The Bank of England is the UK’s central bank and it is independent from the government. It sets a “base rate” and this influences how much lenders will charge borrowers who take out a mortgage, a loan or a credit card.

So if the Bank of England puts its interest rate up, that means you'll pay more interest on borrowed money - unless you’ve borrowed it at a fixed rate.

Interest rates are often a big deal for people with mortgages, especially those who do not have loan with a fixed rate.

But it is not all bad news, as higher interest rates should mean an increase in the interest people earn on savings - though banks can be slow to pass on these rises.

Read more: How an interest rate rise affects you and your money

Michael Race
Business reporter

Interest rates are expected to be left unchanged as the Bank of England looks to balance the impact of higher rates on the UK economy.

Sluggish economic growth and signs that the country's job market is slowing down have led to predictions that rates will be held at 5.25%.

Rates had been hiked previously in a bid to slow the pace of price rises and are at the highest level for 15 years.

But money markets have placed a 92% chance that rates will be held.