Bank of England raises interest rates to 0.75%
- Author: Zachary Reyes Aug 03, 2018,
Aug 03, 2018, 2:57
This will push borrowing costs up to the highest level since March 2009. Markets are pricing a more than 90% chance of a hike, according to the latest data.
SNP economy spokesperson Kirsty Blackman MP added: "The hike in interest rates will deliver a further blow to the living costs and standards of millions of families across the United Kingdom, who are already feeling the squeeze as prices rise too fast".
BOE officials voted unanimously to raise the central bank's policy rate to 0.75% from 0.5% following the rate-setting Monetary Policy Committee's August meeting, the BOE said Thursday.
Several economists have challenged the need for a rise now, given not only the Brexit risks but also the potential damper on global growth from U.S. President Donald Trump's import tariffs and counter-moves by other countries.
So there is no direct link to the Bank rate.
Inflation is a worry: Good monsoon and a higher-than-usual increase in government-guaranteed price for crops will raise farmers' income, then rural demand and then inflation. For the April to June quarter, the rates remained unchanged.
Kunal Shah, CFA, Fund Manager-Debt, Kotak Mahindra Life Insurance: From the bond market perspective a neutral hike is a welcome development as it takes away uncertainties on terminal rate in near term. Over the last two bi-monthly MPC review meetings; there has been a total of 50 bps increase in the repo rate.
Ben Brettell, senior economist at Hargreaves Lansdown, commented: "The main argument for raising rates now is that it gives the Bank more room for manoeuvre when the next downturn hits". A basis point is one-hundredth of a percentage point. The hike is in line with the predictions made by analysts.
"The average two-year fixed mortgage rate however was significantly higher back in February 2009, standing at 4.88%, compared with just 2.53% today". The number of people in jobs is at a record high. "They'll fit one more in before he leaves, probably in May next year, at which point we should have some clarity over Brexit".
Why is the interest rate going up? . He said: "Its been a problem for decades that the banks always pass the pain onto savers but not the benefits".
He said: 'Tracker mortgage customers who wish to get a bespoke idea of what a rate rise means for their individual circumstances should click on our interest rate change calculator.
"The market is now expecting an 8-1 split in favour of a hike, with Sir Jon Cunliffe the only member expected to dissent and vote against a hike", she wrote.
BoE Governor Mark Carney has said all bets on future BoE rate hikes would be off if there is a no-deal Brexit.
"But we expect the economy to regain some momentum next year following a soft Brexit outcome, enabling the MPC to raise Bank Rate twice in both 2019 and 2020, exceeding the glacial pace of tightening now priced-in by markets", says Samuel Tombs, Chief UK Economist with Pantheon Macroeconomics.