Every few weeks, nine people at the Bank of England decide the interest rate that shapes borrowing costs across the UK. They are the Monetary Policy Committee, usually called the MPC. Its decisions move mortgage rates, savings rates, gilt yields and the pound, so understanding how it works is one of the basics for anyone trading UK markets.
What the MPC does
The MPC’s main job is to keep inflation close to the government’s target of 2 per cent. Its key tool is Bank Rate, the interest rate the Bank of England pays on reserves held by commercial banks. Changes to Bank Rate ripple through to the rates banks charge on loans and pay on deposits. Raising rates tends to cool spending and inflation. Cutting rates tends to support growth. The committee can also buy or sell government bonds to influence longer-term interest rates.
Who sits on it
The committee has nine members. Five are from inside the Bank: the Governor, three Deputy Governors and the Chief Economist. Four are external members appointed by the Chancellor, usually economists from universities or the private sector. The external members are there to bring outside views and avoid groupthink.
How decisions are made
The MPC meets eight times a year. Each member votes, and the majority decides. The Governor has the casting vote if needed, but that is rare. The decision is announced at 12:00 UK time along with minutes that show how each member voted and summarise the debate. Four times a year, the Bank also publishes its Monetary Policy Report with new forecasts for growth and inflation.
Why the vote split matters
Markets do not just watch whether rates change. They watch how the committee voted. A decision to hold rates where several members wanted a cut sends a very different signal from a unanimous hold. The split hints at where policy might go next. We look at this in more detail in our guide to MPC split votes.
How markets react
Sterling and gilt yields often move sharply on decision day. A more hawkish outcome, meaning more concern about inflation, tends to push gilt yields and the pound higher. A more dovish outcome, leaning towards cuts, tends to do the opposite. Shares can react too, especially housebuilders and banks, which are sensitive to interest rates. Our explainer on how Bank of England speeches move sterling covers what happens between meetings.
What traders watch beforehand
Ahead of a meeting, traders follow inflation data, wage growth, business surveys and speeches by committee members. They also watch global factors, such as oil prices and what the US Federal Reserve is doing. Moves in the dollar after events like the 2026 US midterms, covered in our Morning Market Brief, can also affect sterling in the days before a decision.
The beginner’s takeaway
The MPC is nine people voting on the UK’s main interest rate to keep inflation near 2 per cent. The decision, the vote split and the Bank’s forecasts all move markets. Knowing the calendar and what each part signals will help you make sense of decision day.
Central bank days test both knowledge and discipline. To see how ready you are, take the free Samuel & Co Trading Trader Assessment.
