A Bank Rate rise pushes up the interest rates banks charge

When the Bank of England raises Bank Rate, other interest rates rise too: on mortgages, business loans, credit cards and savings accounts. They do not all move by the same amount. A one-point rise in a rate for overnight borrowing typically moves the rate on a long mortgage or a three-year car loan by less than one point, because supply and demand in each market for lending set the exact rate.

Dearer borrowing cuts spending by firms and households

Higher interest rates make it less attractive for firms to borrow to invest, and even a firm with cash of its own finds that putting it in a financial investment now pays better than buying new machinery. Households are discouraged from borrowing for big-ticket items such as houses and cars, and higher rates reward saving, so they save more and consume less. So two parts of aggregate demand, investment and consumption, fall.