Bank of England raises interest rates to 0.75%

The Bank of England’s monetary policy committee appears almost certain to raise interest rates this week

The Bank of England’s monetary policy committee appears almost certain to raise interest rates this weekYUI MOK PA

The rate rise decision followed a unanimous 9-0 vote of the Bank's Monetary Policy Committee, chaired by governor Mark Carney.

This initial reaction appears to be correct, but the subsequent selling pressure will certainly have burnt some hands.

The pound also fell against the euro from an earlier flat position.

John Macintosh, head of tax in for Deloitte in scotland, said: "Sub-trend growth and a cloudy outlook hardly make a compelling case for a higher United Kingdom rates".

"Risk premia on GBP assets have increased somewhat in recent weeks". This means marginally higher interest earnings for customers opening fixed deposits with banks.

It also wants to see rates come off the emergency lows that have been in place ever since March 2009 and return to more "normal" levels.

The UK economy expanded by just 0.2% in the first three months of the year.

He said: "Rates can be expected to rise gradually".

The Bank of England is expected to hike interest rates to their highest level for nearly a decade on Thursday.

What the gloomsters ignore is that Britain recovered from the financial crisis far more quickly than most of its European counterparts, and that our jobless rate is half that of the average across the eurozone, which is experiencing catastrophic youth unemployment rates of above 30 per cent in Greece, Spain and Italy.

He put the rise down to the Bank wanting some flexibility to allow it to lower rates again after Brexit.

While pay is finally starting to outpace price rises, wage growth remains modest by historical standards.

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RBI has projected inflation at 4.6 per cent in Q2, 4.8 per cent in H2 of 2018-19 and 5.0 per cent in Q1 2019-20.

Chwee Ange asks: How will the interest rate rise impact on pension annuity rates?

The Institute of Directors said the Bank had "jumped the gun" by raising the rate now. But even with a 9-0 hike, EUR/GBP is now already higher than before the meeting.

"We can't be handicapped or tied by the range of Brexit possibilities", he said.

"It doesn't bode well for the GBP that even a unanimous hike can not really get the momentum in Sterling going". Of those that did see a rise, it was not always the full 0.25%.

EUR/GBP at 0.90 gives a GBP/EUR exchange rate of 1.11.

A Bank rate rise does not guarantee the equivalent increase in interest paid to savers.

"We look for the BoE to keep rates on hold now until the Brexit outlook becomes clearer".

Here is what the major providers have said so far.

They typically last for two or five years - and of course the rate doesn't rise during that period.

Recession was avoided and the United Kingdom economy, boosted by a more competitive exchange rate for the pound, has continued to grow, if at a more moderate rate than some of our trading partners in the G7 club of the richest nations. This has now gone down to 0.63%, but it's still higher than it was before the rate increased at the end of 2017. Brexit risk will stymie the economy, underlying inflation is weak and the housing market can not handle a faster pace of tightening.

"Subsiding consumer and business confidence, especially in forward looking gauges, together with the responses to the Ipsos Mori opinion poll, suggest strongly in our view that private sector economic agents are increasingly and demonstrably not behaving in this way", Wraith concluded.

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