Bofe historic rate rise the most dovish of hawkish stances

In what had been increasingly “factored in” by the stock market, the Bank of England has raised interest rates for the first time in more than ten years.

There is the clear novelty value for many rookie financial traders who now know that, like share prices, base rates can go up and down. But a quarter- point to 0.5 per cent? Tiny earthquake, nobody dead. We knew it would eventually come, particularly with the stubborn rise of inflation to 3 per cent.

It is more of interest in embarking on the new direction of travel rather than the negligible quantum itself. Mark Carney, governor of the Bank of England, has said repeatedly that after a long period of rates at historical lows, when rates eventually rose they would do so only gradually and probably remain at lower levels than we had been used to before the financial crisis.

Quarter- point movement in rates, particularly if implemented only gently over the new few years, are unlikely to scare the horses as far as consumers are concerned. It is not behaviour- changing.

True, our exporters may feel a tad uneasy as a more competitive sterling takes away some of the advantage they have enjoyed in recent years in selling their goods overseas, but once again the scale of the change is only playing at the margins.

And, conversely, many British companies have suffered from rising commodity prices from abroad due to the pound’s weakness, so may feel get some benefit. But, again, at these levels of rates nobody is going to see a big positive effect.

Will banks pass the cut on to savers? Carney says he expects so, and the Bank of England will be monitoring it. But to get, for argument’s sake, 0.03 per cent on your savings rather than 0.01 per cent is not going to make depositors feel wealthier.

Being positive, rates at historical lows were down to the authorities not wanting the financial crisis and 2008- 9 recession from tipping into another 1930s- style depression; they were an emergency measure.

Rates edging back upwards are an indication that we are not in economic intensive care any more, even with the uncertainty and slowdown wrought by last year’s Brexit vote.

If it is a more hawkish tone from the Bank, it is one of the most docile hawks we have encountered for many a day.