Historical Base Rates

The sharp decline in interest rates.

Interest rates peaked in 1990 when the UK was fighting to stay in the ERM and keep the value of the Pound fixed. The combination of high interest rates and strong pound reduced the inflation, created by the Lawson boom, but, also caused a deep recession.

After the UK left the ERM, interest rates fell sharply allowing the UK to grow.

During the 1990s and early 00s, base interest rates remained remarkably stable – between 4 and 6%. This reflected the long period of low inflationary growth. However, this stability hid behind a mask of unsustainable house price rises and subprime mortgage lending.

In 2007, the house price bubble burst, and a modest recession became very deep in the autumn of 2008. This sharp downturn, led to a quick cut in interest rates as the MPC realised the extent of the economic downturn.