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Interest Rates Rise

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Thu 02 Aug 2018

Interest Rates Rise

The Bank of England raised its benchmark interest rates today to 0.75 per cent, its highest level since the depths of the financial crisis in March 2009 when the benchmark was slashed to 0.5 per cent.

 

All nine members of the BoE's Monetary Policy Committee (MPC) voted to raise the base rate by a quarter of a per cent.

 

 

 

Economists had been predicting a split vote thanks to mixed signals for the strength of the UK economy.

 

 

 

But the MPC said the economy had recovered from a seasonal slowdown exacerbated by the Beast from the East.

 

"The MPC continues to judge that the UK economy currently has a very limited degree of slack," the committee said in minutes published with its decision. 

 

"Unemployment is low and is projected to fall a little further. In the MPC’s central projection, therefore, a small margin of excess demand emerges by late 2019 and builds thereafter, feeding through into higher growth in domestic costs than has been seen over recent years."

 

Speaking after the decision, Mark Carney said that growth in average pay rises have increased with further pay rises expected this year.

 

Despite some positive economic signs, wage growth has remained below pre-crisis level and household debt has risen sharply.

 

Analysts said this means some households may struggle with the rise in borrowing costs, dragging down the consumer spending that drives much of the economy.