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Bank rate

The rate of interest at which the Bank of England charges banks for secured overnight lending (secured by gilt holdings). Banks can borrow from the Bank of England when they have an urgent need for finance because they are not able to borrow money at viable rates from other sources. This rate is also known as the Repo Rate

In theory there should be a correlation between the bank rate and other interest related variables such as the rate at which commercial banks decide to lend to businesses and consumers at. The idea is that if the bank rate falls it should create cheaper and easier credit for borrowers across the economy. The diagram below summarises the influence that changes in the bank rate have on the rest of the economy over time. 


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