Bank of Eng­land hints at Novem­ber in­ter­est rate rise

Iran Daily - - Global Economy -

The Bank of Eng­land has raised the prospect of an in­ter­est rate rise as early as Novem­ber, in an at­tempt to re­lieve the squeeze on liv­ing stan­dards from surging prices and slug­gish wage growth.

Thread­nee­dle Street left in­ter­est rates at their record low of 0.25 per­cent amid fears over Brexit, but dropped a heavy hint that the first in­crease in the cost of bor­row­ing for a decade may come sooner than ex­pected if the econ­omy con­tin­ues to strengthen, re­ported the Guardian.

Fi­nan­cial mar­kets now sug­gest there is a 42 per­cent chance of a rate in­crease in Novem­ber, up from just 18 per­cent a week ago. The odds on a De­cem­ber rise are now 54 per­cent.

The squeeze on house­holds and a strength­en­ing econ­omy mean some with­drawal of mone­tary stim­u­lus was likely to be ap­pro­pri­ate over the com­ing months, the Bank said.

It added that a ma­jor­ity of the in­ter­est rate set­ting com­mit­tee agreed with that as­sess­ment, and the gover­nor, Mark Car­ney, later con­firmed that he shared the ma­jor­ity view.

The pound jumped more than one per­cent against the dol­lar and the euro as the fi­nan­cial mar­kets di­gested the im­pact of the com­ments. Such strong hints on likely rate changes are not usual.

Rais­ing the cost of bor­row­ing would re­verse the emer­gency rate cut in­tro­duced by Car­ney in Au­gust 2016 in the wake of the Brexit ref­er­en­dum. It would also raise the cost of mort­gages for the first time for mil­lions of home­buy­ers who have never ex­pe­ri­enced a rise in their monthly re­pay­ments as a re­sult of a rate change.

Na­tion­wide’s base mort­gage rate would rise from 2.25 per­cent to 2.5 per­cent, mean­ing re­pay­ments on a £100,000 mort­gage would rise £13 a month to £449. A £200,000 mort­gage would go up by £25 to £897.

The Bank’s mone­tary pol­icy com­mit­tee (MPC), which sets bor­row­ing rates, was split, with the ex­ter­nal econ­o­mists Michael Saun­ders and Ian Mccaf­ferty call­ing for an im­me­di­ate rise to 0.5 per­cent to keep in­fla­tion in check.

Turk­ish Lira Euro Bri­tish Pound Aus­tralian Dol­lar Ja­panese 100 Yen Crude Oil Gold Cop­per 0.2914 1.1918 1.3432 0.8001 0.0090 $49.44 $1330.90 $2.95 Chi­nese Yuan UAE Dirham Kuwaiti Di­nar Iraqi Di­nar Saudi Riyal Sil­ver Plat­inum Wheat 0.1527 0.2722 3.3178 0.0008 0.2722 $17.81 $981.50 $441.50

the­guardian.com

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