LONDON-The Bank of England raised its benchmark interest rate for only the second time in a decade, as worries over inflation trumped concerns about Brexit and a brewing global trade war.
Economists and investors expect the Monetary Policy Committee (MPC) to increase rates from 0.5% to 0.75%.
Meanwhile, reverse repo, the rate at which the central bank borrows money from commercial banks within the country, was adjusted to 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent. But the same market on August 1 slipped 85 points even though commentators said the second rate hike was on "expected lines".
Investec economist George Brown said he is "fairly confident" the Bank will move to raise rates and is pencilling in an 8-1 vote in favour, with Sir Jon Cunliffe the only dissenter.
"That will then force the banks to push through the bank rate rise". "They'll fit one more in before he leaves, probably in May next year, at which point we should have some clarity over Brexit".
Borrowers not on fixed-rate interest are likely to see an increase in their loan repayments, but the lender has to legally give you notice in order to do this, subject to the terms and conditions of your account. That was a fraction lower than a projection of rates of 1.2 percent the last time the BoE published forecasts for the economy in May.
"It is nearly unthinkable that the Bank of England will follow up with further rate rises in the next few months given the risks on the horizon".
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Sterlingis trading at the day's low despite the Bank of England voting 9-0 for a 0.25% interest rate hike at today's MPC meeting.
It is also implies rates will rise substantially faster than the market now expects.
When rates last increased, Bank of England rate setter Ian McCafferty told LBC he "fully expected" savers to benefit.
Policy stance would remain "neutral".
The central bank said inflation in two years' time was likely to be 2.09 percent, above the BoE's 2 percent target.
BoE Governor Mark Carney has said all bets on future BoE rate hikes would be off if there is a no-deal Brexit. Greater clarity on MSPs, crude oil prices and other inflationary trends, fiscal risks and the central and state government borrowing programme for H2 FY2019, may emerge as triggers for a rise in bond yields.
In its accompanying quarterly inflation report, the Bank kept its forecast for growth this year unchanged at 1.4 per cent, but increased the outlook for 2019 to 1.8% from the 1.7 per cent previously predicted.
According to the Nationwide Building Society, anyone on a standard variable rate will see an increase of £12 on a mortgage of £100,000 and on a £200,000 mortgage, £25.