Base rate increased to 0.75%
Gives scope for Brexit related cut
Inflation still comfortably outstripping interest rates
Kevin Doran, chief investment officer at AJ Bell, comments:
“It feels like there is an element of the Bank of England reloading the interest rate gun in case we need an emergency Brexit related cut next year. The UK economy is hardly charging ahead but, with interest rates at historic lows, Mark Carney and Co know that they have little room for manoeuvre should there be a stumble as we head towards the 29 March Brexit deadline next year. Today’s 0.25 percentage point increase at least reloads one bullet.
“Whilst the increase is an improvement for savers, with inflation still being fuelled by a rising oil price and weak sterling it is little help for the vast swathes of people whose purchasing power has been eroded by inflation comfortably outstripping the meagre interest earned on their savings. Let’s hope banks are quick to pass on the increase to at least provide some help to savers although unfortunately this often doesn’t materialise.
“It will also not be welcomed by the vast numbers of UK borrowers, many of whom will only ever have known rock bottom interest rates and hence might be vulnerable to increases.
“From an investment perspective a base rate of 0.75% is still exceptionally accommodative and is likely to continue to stoke asset prices as investors look for a real rate of return above inflation, something that is scarce in cash or Government bonds.”