British Interest Rates

The Fed interest rate was recently set at a quarter percent for 7 years until 2015. This is a long stretch that was the result of the bursting subprime mortgage bubble. It is, however, far from the longest stretch historically in the world.

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Modern banking was first seen in Britain, with banknotes coming into existence in 1695 via the Bank of England. They copied practices, such as the fractional reserve system from Holland, and added their own touches like the aforementioned banknotes.

The Bank of England also set the first national interest rate at six percent.
It is surprising by modern standards that it took a long time before interest rates came to change with the economy and the country’s circumstances. The rate moved from 6 to a few lower values over the next 20 years. In March 1719, they raised the rate from 4% to 5%.

Britain was doing well for itself. The next major moment was the 7 years war, where Britain and their allies fought the French and their allies. Britain prevailed in 1763 and took ownership of Canada. Throughout this, the interest rate remained steady at 5%.

Next came the American Civil War of Independence, from 1775 to 1783. Any American can tell you how that went. Still, 5% interest rate.

After this, Britain was in many conflicts with the French in the period from 1790 to 1815. This period even includes an embargo by Napoleon against the Brits. You guessed it, 5%.

Finally, in May 1822, the interest rate in Britain changed after 103 years. The period of over a century of the same rate was not paired with a similarly epic change. It went from 5% to 4%. It was from here that the rate started changing more often.