Concerns about “inflation over target”1 and "limited" slack in the economy have prompted the Bank of England to raise interest rates for the first time in more than a decade.

At noon today (2 November 2017), the Bank’s Monetary Policy Committee (MPC) voted 7-2 in favour of raising the interest rate to 0.5%, from a record low of 0.25%.

The majority of the MPC agreed that now was the right time to raise interest rates “to return inflation sustainably to the target”.

But the Committee acknowledged that "uncertainties associated with Brexit are weighing on domestic activity". Some economists, including former MPC member David Blanchflower, had warned against an interest rate rise.

What’s changed since the last interest rate rise?

The last time we saw a rise in the interest rate was 5 July 2007. To put that into context, Tony Blair had recently resigned as Prime Minister and the first iPhone had just been released.

On that day, the Bank voted for a higher interest rate against a backdrop of a “strong global economy”. The rate had risen twice that year already and there was little sign of the impending financial crisis.

But between the last interest rate rise and today, the MPC had met 118 times and decided against raising interest rates on every occasion.

When setting interest rates, the MPC considers many factors including debt, savings, inflation, economic growth, employment and wages. They’ll also look at conditions in economies and financial markets worldwide.

So how similar is the situation today compared with 2007? We’ve gathered some of the main indicators and compared the latest data points with those that were available on 5 July 2007 - when the Bank last chose to raise the interest rate.

Select higher or lower for each indicator and find out what’s changed in the last decade.

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Why has the interest rate stayed so low for so long?

After rising to 5.75% in July 2007, the Bank of England base rate was subsequently cut nine times in the next two years as the financial crisis took effect.

It reached a record low of 0.5% in March 2009 and remained at that level, partly because of the long-lasting impact of the crisis, before dropping again to 0.25% in August 2016.

The economy took much longer to recover from this recession compared with previous ones, which kept interest rates low

Previous recessions, number of quarters taken for GDP to reach pre-recession level

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But the general downward trend in interest rates goes back further than the last decade. Less than 30 years ago, the base rate was close to 15%.

The interest rate has fallen substantially in the last 30 years

Bank of England base rate, 1975 to 2017

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Despite today's rise, we're unlikely to see a substantial reversal to that trend - Mr Carney has said that any increases to the rate will be “gradual” and “limited”.

Find out how the rise in the interest rate could affect you

If you’re saving for something, here’s a calculator to help you find out how much extra you could earn with a higher interest rate.

Equally, if you’re on a variable rate mortgage, use this calculator to see how much extra you could be paying each month.

Other Visual.ONS articles

What's changed since the Brexit vote? Are your wages keeping up with inflation? Understanding the UK economy

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Footnotes:

  1. When the Bank of England’s Monetary Policy Committee (MPC) decides whether or not to change the interest rate each month, they do so with the aim of meeting the 2% inflation target.