The Bank of England is deciding whether to raise interest rates for the 15th time in a row.
The Bank of England is considering whether to put up interest rates for a 15th time in a row, in an attempt to further slow rising prices.
In August, the Bank rate, set by the Monetary Policy Committee, went up to 5.25% from 5%.
It could go up on Thursday, bringing further pain for some homeowners but better news for savers, or policymakers may decide to leave rates unchanged.
The Bank rate is currently at its highest level for 15 years.
The theory is that raising interest rates makes it more expensive to borrow money, meaning people have less to spend, reducing demand and inflation.
Rates have risen 14 consecutive times since December 2021 as the Bank tries to bring inflation closer to its target of 2%.
So far, the impact has been limited, but there are now some expectations that this could be the final rise for a while, if it comes at all.
Prices rose by 6.7% in the year to August , according to the Office for National Statistics (ONS). This was lower than 6.8% in the year to July, and down from the peak of 11.1% in October 2022.
However, that is still more than three times the Bank's 2% target.
Policymakers will be keeping a close eye on the "core inflation" rate - a measure which strips out volatile factors such as food and energy. It was down from 6.9% in July to 6.2% in August.
Financial markets think rates might be at or close to their peak. Analysts are split on whether there will be a rise to 5.5%.
At one point, UK rates were expected to rise above 6%, but that peak is now expected to be lower.
The Bank has to balance the risk of damaging the economy, which has shown little sign of growth, with the need to slow price rises.
Its Monetary Policy Committee meets eight times a year to decide rates .
Mortgages
Just under a third of households have a mortgage, according to the government's English Housing Survey .
When interest rates rise, more than 1.4 million people on tracker and standard variable rate (SVR) deals usually see an immediate increase in their monthly payments.
A rise from 5.25% to 5.5% would mean those on a typical tracker mortgage will pay about £26 more a month. Those on SVR mortgages would face a £14.50 jump.
Even if there is no change then, compared with December 2021, those on a tracker mortgage are paying £540 more a month, or £299 more a month on a SVR.
Around three-quarters of mortgage customers hold fixed-rate deals.
Their monthly payments may not change immediately, but higher interest rates mean house buyers and those remortgaging will have to pay a lot more than if they had taken out the same mortgage a year or more ago.
This so-called "mortgage bomb" has become a huge economic and political issue.
As people roll off cheap fixed-rate deals onto products with much higher rates, monthly repayments can soar by hundreds of pounds. Banking trade body UK Finance says there are about 800,000 fixed rate deals ending in the second half of 2023, and about 1.6 million deals expiring next year.
The IFS, a politically independent think tank, warns rising interest rates could mean 1.4 million mortgage holders see their disposable income fall by more than 20% .
You can see how your mortgage may be affected by rising rates with our calculator:
Credit cards and loans
Bank of England interest rates also influence the amount charged on credit cards, bank loans and car loans.
The latest Bank statistics show that in July, the average annual interest rate was 21.7% on bank overdrafts and 20.76% on credit cards . The average rate for personal loans was 8.61%, up slightly on the previous month.
Lenders could decide to put prices up, if they expect higher interest rates in the future.
Savings
Individual banks and building societies usually pass on interest rate rises to customers.
There are some good deals on the market, so analysts say that customers should shop around, as many will be on accounts paying little or nothing.
The UK's financial watchdog has warned that banks will face "robust action" if they offer unjustifiably low savings rates to their customers .
Although many saving accounts are paying more, even the best interest rates aren't keeping up with inflation.
This means the value of cash savings - its buying power - is falling in real terms.
Inflation has been relatively high worldwide, after Covid restrictions eased and consumers spent more.
Many firms experienced problems getting enough goods to sell. Oil and gas costs were also higher than they had been - a problem made worse by Russia's invasion of Ukraine.
Although many elements of inflation are global, there are also domestic factors at play in the UK, including rising wages.
Interest rates have been increasing across the world in recent months.
However, after the August increase, the UK had the highest rates in the G7 - a group of the world's seven largest so-called "advanced" economies.
It is higher than the Euro area and the US.