What is the bank of england?

The Bank of England is the UK's central bank. It sets Bank Rate, the main interest rate, to keep inflation at the government's 2% target, issues banknotes and oversees the safety of banks. It has been operationally independent since 1997. In September 2026 it held Bank Rate at 3.75%.

Founded in 1694, the Bank of England is one of the oldest central banks in the world. It was nationalised in 1946. In 1997 the government gave it independence to set interest rates, so decisions would be made by experts rather than politicians. The government still sets the inflation target, which is 2% on the CPI measure. It is based on Threadneedle Street in the City of London.

Interest rates are set by the Monetary Policy Committee, which has nine members and meets eight times a year. On 17 September 2026 it held Bank Rate at 3.75%, with six members voting to hold and three wanting a rise. CPI inflation was 3.1% in August 2026, above the target. If inflation strays more than one point from target, the Governor must write to the Chancellor explaining why.

The Bank also prints banknotes, acts as lender of last resort in a crisis and regulates banks through the Prudential Regulation Authority. Its decisions affect mortgage rates, savings rates, the pound and government borrowing costs. Since 2009 it has also used quantitative easing, buying government bonds to support the economy, and is now gradually selling them back. Its Governor is appointed by the government for an eight-year term.

Where you've seen it

The UK and the US in the late 1970s and early 1980s, when governments and central banks tried to control money growth to bring down inflation.

In the UK today

Strict money supply targets were dropped long ago, but the idea that controlling inflation is central lives on in the Bank of England's independence and its 2% inflation target.

The critics

Critics say strict money targets were hard to hit and the policy caused deep recessions and mass unemployment in the early 1980s. Supporters say it broke the cycle of high inflation.