Interest rates and monetary policy: Economic indicators

Economic indicators are quick-read summaries of the latest data focusing on different aspects of the UK economy. The full suite of indicators can be found on the main Economic Indicators page.

Major central banks around the world tightened monetary policy in response to rising inflation, initially caused by higher goods and energy prices, as well as bottlenecks in global supply chains. Beginning in 2023, rates are being cut.

UK (Bank of England)

On 8 May, the Bank of England’s Monetary Policy Committee (MPC) announced it had cut interest rates by 0.25 of a percentage point to 4.25%. The MPC vote was split: five members in favour of this cut; two in favour of a larger 0.5 percentage point cut; and two in favour of no change in rates

The MPC’s previous cycle of rate increases – from 0.1% in December 2021 to 5.25% in August 2023 – came in response to high inflation, which peaked at 11.1% in October 2022. Inflation then fell to 1.7% in September 2024 before picking up again in late 2024 and early 2025. Inflation was 2.6% in March 2025 on the CPI measure – above the MPC’s target of 2%.

In forecasts published 8 May, the Bank of England forecast the inflation rate to rise to 3.5% by the third quarter of 2025 before easing, though it is forecast to remain above 2% until the first quarter of 2027.

The results of the next scheduled MPC meeting will be announced on 19 June.

Source: Bank of England, Interest rates and Bank Rate [accessed 8 May 2025]

The MPC is reducing the size of its asset purchase – or quantitative easing, QE – programme from its peak value of £895bn to £620bn on 30 April 2025. It is doing this by letting some of the government bonds it holds mature and by actively selling some of the bonds it holds to the market. At its September 2024 meeting, the MPC said it planned to reduced the size of the assets it holds by a further £100bn over the year to September 2025.

QE consists of the Bank creating new money electronically (as central bank reserves) and then using it to purchase financial assets, mostly government bonds.

In March 2020 the Bank introduced measures in response to Covid-19. Interest rates were cut to 0.1% – the lowest they have ever been. They remained at this level until December 2021. The MPC also expanded its quantitative easing (QE) programme by £450bn in 2020 and 2021, taking the total value of assets it owned to a peak of £895bn. For more, see section 4.2 of the Library briefing paper, Coronavirus: Economic impact.

United States (Federal Reserve)

Interest rates were left unchanged at a range of 4.25% to 4.50% by the Fed at its monetary policy meeting ending 7 May. The Fed and its Chair Jerome Powell emphasised the high degree of uncertainty over the economic outlook given changes to US trade policy. The Fed is slowing the pace it reduces the amount of assets it holds in its QE programme from $60bn to $40bn per month as of April 2025.

The Fed’s next scheduled policy meeting ends on 18 June.

Responding to the Covid-19 pandemic, the Fed had by 15 March 2020 cut interest rates to close to 0% from 1.5%‑1.75% prior to the pandemic. On 23 March 2020, the Fed announced a wide range of measures designed to support the economy. This included buying debt from the government, corporations and purchasing other securities (such as those backed by mortgages and other assets). The Fed began to raise rates again in March 2022, taking them from 0-0.25% to 5.25-5.50% in July 2023. 

Eurozone (European Central Bank)

At its 17 April 2025 meeting the ECB cut its main interest rates by 0.25 of a percentage point, with the deposit rate lowered from 2.50% to 2.25%. This was the seventh time the ECB has cut rates since its cycle of rate cuts began in June 2024. Markets expect rates to be lowered further during 2025.

The ECB is unwinding its two main quantitative easing programmes, including its pandemic-related QE programme.

The ECB’s next scheduled policy meeting ends on 5 June.

The ECB launched its pandemic response on 12 March 2020 and expanded it significantly on 18 March and 4 June. The ECB has also made cheap loans available to banks to encourage them to lend to businesses.

In July 2022, the ECB announced the creation of a new bond purchase programme, the Transmission Protection Instrument (TPI). The TPI is designed to be used, if needed, to lower government borrowing costs in individual countries, if these costs are rising due to “unwarranted, disorderly market dynamics”. 

Next updates

This page is updated following monetary policy meetings. The next scheduled meetings are:

• UK (19 June)
• US (18 June)
• ECB (5 June)