AFP, London :
The Bank of England on Thursday raised its main interest rate for the first time since 2007 as it tackles Brexit-fuelled inflation, and signalled more hikes lie ahead.
Policymakers voted 7-2 to tighten borrowing costs to 0.50 percent from a record low of 0.25 percent, as a weak pound caused by Brexit uncertainty has hiked the cost of imports into Britain and in turn sent inflation rising far above the BoE’s target.
Thursday’s hotly-anticipated move mirrors policy tightening seen in the United States and eurozone as the global economy strengthens overall.
“The time has come to ease our foot off a little from the accelerator,” BoE Governor Mark Carney told a press conference following the decision.
“While the sheer novelty of the first increase in bank rates in a decade creates some uncertainty around its impact, there are reasons to expect it to be no larger than usual.”
Rising interest rates tend to increase repayments for borrowers and therefore stretch household budgets-which are already being eroded by weak wage growth and high inflation. However, they also boost income for savers.
Carney himself voted with the majority in favour of the rate hike, but two MPC members felt there was “insufficient” evidence of a recovery in wage costs.
Sterling slid in value after the BoE cautioned that any more hikes would be very gradual.
The BoE nevertheless hinted that more increases could be on the way, saying it stood “ready to respond” should the economy require it.
And the bank downgraded the 2017 economic growth forecast to 1.6 percent from 1.7 percent previously.
“The decision to leave the European Union is having a noticeable impact on the economic outlook,” the bank noted in the minutes of its regular policy meeting.
“The overshoot of inflation throughout the forecast predominantly reflects the effects on import prices of the referendum-related fall in sterling.”
The Bank of England on Thursday raised its main interest rate for the first time since 2007 as it tackles Brexit-fuelled inflation, and signalled more hikes lie ahead.
Policymakers voted 7-2 to tighten borrowing costs to 0.50 percent from a record low of 0.25 percent, as a weak pound caused by Brexit uncertainty has hiked the cost of imports into Britain and in turn sent inflation rising far above the BoE’s target.
Thursday’s hotly-anticipated move mirrors policy tightening seen in the United States and eurozone as the global economy strengthens overall.
“The time has come to ease our foot off a little from the accelerator,” BoE Governor Mark Carney told a press conference following the decision.
“While the sheer novelty of the first increase in bank rates in a decade creates some uncertainty around its impact, there are reasons to expect it to be no larger than usual.”
Rising interest rates tend to increase repayments for borrowers and therefore stretch household budgets-which are already being eroded by weak wage growth and high inflation. However, they also boost income for savers.
Carney himself voted with the majority in favour of the rate hike, but two MPC members felt there was “insufficient” evidence of a recovery in wage costs.
Sterling slid in value after the BoE cautioned that any more hikes would be very gradual.
The BoE nevertheless hinted that more increases could be on the way, saying it stood “ready to respond” should the economy require it.
And the bank downgraded the 2017 economic growth forecast to 1.6 percent from 1.7 percent previously.
“The decision to leave the European Union is having a noticeable impact on the economic outlook,” the bank noted in the minutes of its regular policy meeting.
“The overshoot of inflation throughout the forecast predominantly reflects the effects on import prices of the referendum-related fall in sterling.”
