UK raise interest rates for first time in 10 years

Summary:

The Bank of England raised interest rates today for the first time in over ten years. The MPC took the decision to raise the rate from 0.25% to 0.5%, reversing the decision made last August in the wake of Brexit.

The decision was made following better than expected GDP growth figures. As a consequence nearly four million households will face higher mortgage interest payments, although savers will benefit. The financial markets predict two additional increases over the next three years which would take the rate up to 1%.

 

Analysis:

The decision to raise interest rates has puzzled a number of financial analysts. The confusion surrounding Brexit and progress of those negotiations mean many perceive the rise to be a considerable risk. The bank meanwhile has justified the decision by citing fears around inflation.

What’s evident is the move has split the market and analysts. Time will tell whether the bank’s decision proves to be correct, however short term it seems to be causing greater confusion amidst elongated Brexit negotiations.

 

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