Bank Rate reduced to 4% - August 2025
The Bank of England’s Monetary Policy Committee is responsible for making decisions about Bank Rate.
Central banks
Riding the rate wave: interest rate and run risks in euro area banks during the 2022-2023 monetary cycle
Add full abstract text in one paragraph.This paper examines how the ECB’s 2022–2023 interest-rate hikes affected euro-area banks’ economic net worth and vulnerability to deposit runs. Drawing on granular, confidential data for 139 banks, we estimate each bank’s economic net worth and find that unrealised losses on loans and bonds averaged around 30 per cent of equity. By September 2023, however, roughly half of these losses had been offset by gains from the deposit franchise and interest-rate swaps.
Riding the rate wave: interest rate and run risks in euro area banks during the 2022-2023 monetary cycle
Add full abstract text in one paragraph.This paper examines how the ECB’s 2022–2023 interest-rate hikes affected euro-area banks’ economic net worth and vulnerability to deposit runs. Drawing on granular, confidential data for 139 banks, we estimate each bank’s economic net worth and find that unrealised losses on loans and bonds averaged around 30 per cent of equity. By September 2023, however, roughly half of these losses had been offset by gains from the deposit franchise and interest-rate swaps.
Impacts of ESG banking regulation on financing new sustainable technologies
How does environmental, social and governance regulation of banks affect capital provision to the sustainability transition? As ambitious sustainability targets face funding challenges, the financial sector is tasked with channeling more private capital into sustainable investments. However, scaling sustainable technologies often requires investment in non-ESG-compliant assets. The mobility transition to electric vehicles, for example, demands increased supply of battery raw materials like Lithium, Cobalt, Manganese, and Nickel.
Impacts of ESG banking regulation on financing new sustainable technologies
How does environmental, social and governance regulation of banks affect capital provision to the sustainability transition? As ambitious sustainability targets face funding challenges, the financial sector is tasked with channeling more private capital into sustainable investments. However, scaling sustainable technologies often requires investment in non-ESG-compliant assets. The mobility transition to electric vehicles, for example, demands increased supply of battery raw materials like Lithium, Cobalt, Manganese, and Nickel.
Real wage catch-up in the euro area
Real wages have been increasing in recent quarters, recovering after their decline during the period of high inflation in 2022. By the first quarter of 2025 – when deflated by price indices that reflect consumption patterns, such as the Harmonised Index of Consumer Prices and the private consumption deflator – real wages had almost returned to the levels recorded prior to the inflation surge.
Fiscal aspects of European defence spending: implications for euro area macroeconomic projections and associated risks
EU government spending on defence is expected to increase in response to heightened geopolitical tensions. This increase underpins efforts towards reaching a higher NATO defence spending commitment, as agreed at the NATO summit of 24-25 June. This box explores the implications for the euro area baseline projections and the risks around the baseline, as reflected in the June 2025 Eurosystem staff macroeconomic projections.
Uncertainty in seasonally adjusted services inflation: the role of Easter and travel
This box outlines the uncertainty related to the seasonal and calendar adjustment of the euro area Harmonised Index of Consumer Prices (HICP) for services. To gauge the impact of statistical estimations with respect to this uncertainty, we zoom in on historical revisions of seasonal and calendar adjustments conducted by the ECB and the results of alternative methods. The implications for the interpretation of services momentum – which moved up sharply recently – are derived from these findings.
Activity and price discovery in euro area inflation-linked swap markets
This article presents evidence from transactions data reported under the European Market Infrastructure Regulation (EMIR). Its aim is to assess the information content of euro area inflation-linked swap rates as measures of inflation compensation. It finds that both the breadth and the depth of overall activity have increased notably. The process of price discovery resulting from trading activity appears healthy on aggregate, and the sectoral composition of activity has shifted towards counterparties that can be deemed more responsive to changes in the inflation outlook.
Higher defence spending and its impact on household expectations
This box examines euro area household perceptions of rising defence spending, a trend reinforced by EU governments’ commitments at recent security discussions. According to the May 2025 ECB Consumer Expectations Survey, 81% of households anticipate increased defence spending within the next year. Public debt is seen as the most likely source of financing, followed by cuts in other spending and tax hikes. Households predict a slight increase in inflation in response to higher defence spending, while their expectations on growth are more varied.
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