The BoE did the expected and hiked the repo rate by 25bp, taking it to 0.50%. The vote at the Monetary Policy Committee was 7-2.
Next BOE meeting
A dovish rate hike from the Bank of England on Thursday has triggered a sell-off in the pound while yields on UK debt have also fallen.
So, the pound has taken a hit post the BOE rate decision, although the MPC voted by a higher margin to hike rates, 7-2 instead of the mooted 6-3, the Bank has made it clear that it is likely to be one and done, rather than embark on a rate-hiking cycle.
The Bank of England decided to increase the Bank rate by 25 basis points to 0.50% in line with expectations. Voting pattern was 7-2 for the rate hike with BOE deputy governors Jon Cunliffe and Dave Ramsden dissenting.
Brexit negotiations, exploring unknown territory
The progress in Brexit negotiations is slower than expected. The next round of negotiations, originally scheduled on September 18, is postponed by a week. Media reports suggested that UK's PM Theresa May was preparing to make an "important intervention" on the talks. While the UK urged the EU to be more flexible and to move to trade deals, the EU insisted that the “divorce bill” issue has to be resolved first. EU's chief negotiator Michael Barnier noted last week that he was “very disappointed” by the UK government as it “seems to be backtracking” on commitments to the bill.
While the hawkish members, mainly Michael Saunders and Ian McCafferty, would warn of strong inflation on the economy, the rest would consider the overall economic environment and uncertain outcome of Brexit as key factors to keep the monetary policy unchanged.
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What is the BOE?
Founded in 1694, the Bank of England is the central bank of the United Kingdom. Sometimes known as the ‘Old Lady’ of Threadneedle Street, the Bank’s mission is "to promote the good of the people of the United Kingdom by maintaining monetary and financial stability". The Bank of England is responsible for keeping the UK’s economy on the right track. They operate monetary policy by moving Bank Rate up and down and, in certain circumstances, we also supplement this with measures such as quantitative easing.
Who is BOE's president?
Mark Carney is Governor of the Bank of England and Chairman of the Monetary Policy Committee, Financial Policy Committee and the Prudential Regulation Committee. His appointment as Governor was approved by Her Majesty the Queen on 26 November 2012. The Governor joined the Bank on 1 July 2013.
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The World Interest Rates Table
The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.