Bank of England Hikes Rates for First Time in a Decade

Investing.com – As expected, the Bank of England (BoE) decided on Thursday to increase interest rates for the first time in a decade.

Specifically, the BoE increased the benchmark from a record low of 0.25% to 0.50%.

This is the first increase since July 2007 when rates were increased to 5.75% and effectively reverses the last rate cut in the wake of the Brexit referendum when the Bank was concerned about uncertainty affecting the British economy.

The decision to hike interest rates was undertaken in a vote with members in favor and opting to hold steady.

That surprised markets who were expecting six members to vote for a hike and three to prefer leaving rates unchanged.

The two dissenting members of the BoE’s Monetary Policy Committee (MPC) were Jon Cunliffe and Dave Ramsden.

Furthermore, all MPC members agreed unanimously to leave its asset purchase program unchanged as expected at ($575 billion) as well as to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion ($13.2 billion).

The from the meeting showed that the BoE now expects inflation to peak at 3.2% in October compared to its previous call for a top at 3.0%.

“On balance, inflation is expected to fall back over the next year and, conditioned on the gently rising path of Bank Rate implied by current market yields, to approach the 2% target by the end of the forecast period,” the minutes noted.

The MPC futher indicated that its outlook for inflation and activity in the November was “broadly similar” to the prior projections in August.

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