What Happened?
The Bank of England Monetary Policy Committee recently voted 7 – 2 in favour of increasing the base rate from 0.25% to 0.5%. This is the first increase in over 10 years and is in line with what we have seen globally this year with rate increases from the US & European Central Bank.
There has been significant analysis in the press with regard to this but we have to take this rate rise in context.
Interest rates were at 0.5% from March 2008 to August 2016. The Bank of England then took the decision to drop the rate to 0.25% in a bid to support the UK economy after last summer's Brexit vote.
This latest decision to raise the rate back to 0.5% in November 2017 means that, despite all the fanfare, we’re in much the same place as we were last summer.
A Sign of Things to Come?
Do we think this is the start of fast and furious interest rate hikes? The short answer is no.
The Bank of England will take a very cautious and measured approach to interest rate decisions and will only increase rates if they feel that the wider UK economy can afford it.
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