Bank of England hikes interest rates to highest level since 2009

Bank of England hikes interest rates to highest level since 2009

Bank of England hikes interest rates to highest level since 2009

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". The hike was done by the Monetary Policy Committee (MPC).

"Policy needs to walk - not run - to stand still", he said as he explained a new BoE estimate of neutral interest rates for Britain's economy, which the central bank believes will rise only slowly against the backdrop of a strong global growth. "We do feel the balances of risks are for further political turbulence between now and October".

Dheeraj Singh, Head of Investments & Fund Manager - Fixed Income, Taurus Mutual Fund: "The decision to hike rates has, quite clearly, been driven by the persistent increase in headline and core inflation that we have witnessed in the last couple of months".

The Bank kept its forecast for United Kingdom growth unchanged at 1.4 per cent in 2018, but upped its prediction for next year to 1.8 per cent. High fuel prices can push inflation higher. And the "new normal" was half that, at 2-3% once inflation is included.

But the message for interest rates remained one of gradual and limited increases as the central bank saw inflation only a fraction above its 2 percent target over the next few years.

Above: The initial reaction by Sterling was to shoot higher, but a sudden change in heart by the market left it nursing losses. RBI can also give assistance to any bank by means of the grant of a loan or advance, direct banks to call a meeting of its directors for the objective of considering any matter relating to or arising out of the affairs of the bank; or require an officer of the bank to discuss any such matter with an officer of the RBI and appoint one or more of its officers to observe the manner in which the affairs of the bank or of its offices or branches are being conducted and make a report thereon.

It continued to pencil in growth of 1.7% for 2020.

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Rana Kapoor, MD & CEO, Yes Bank: The RBI rate hike is a rational response to the recent acceleration in inflation momentum. At the turn of the interest rate cycle, deposit rates went up by 25-50 bps in one go, public sector bank executives said.

Those on fixed-rate deals will feel no immediate impact from a rate rise.

But Carney said there was a wide range of outcomes for Brexit - most of which would require rates to be at least as high as now - and that the central bank was working on the assumption that there would be a smooth transition.

The BoE said Britain's economy, while growing more slowly than in the past ahead of Brexit, was operating at nearly its "speed limit", or full capacity, raising the prospect of more home-grown inflation pressure ahead. "Whatever the shock could happen from, it could come from a no-deal Brexit, we've gone through all the risks of a no-deal Brexit".

The pound made gains versus the euro following the news and was trading higher by almost 0.3% at 1.128.

It took six months for the effects of the Brexit-hit pound to raise prices as imports became more expensive. "If they'd held their nerve back then, rates might have been 1% or more by now, and policymakers' jobs would be somewhat easier today". "Investors appear to be expecting virtually no more tightening this year or next, whereas our forecast is for three more 25bp rate hikes in that time as the United Kingdom economy holds up fairly well", says Ruth Gregory, a senior economist at Capital Economics.

Saver or borrower? Interest rates have risen.

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