Interest rates: “…the BoE believes the UK economy is strong enough to handle a rate rise.”

by | Aug 2, 2018

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Rob Hodgson, Head of Wealth Management at GWM Investment Management: “The Federal Reserve left interest rates unchanged, remaining on track to deliver a hike in September. Closer to home, financial markets were pricing in the near-certainty of today’s rate rise of 25bp in the U.K. The base rate now stands at 75bp. Banks use the rate as a reference point for the amount they pay savers and charge borrowers, so the move matters to millions of us. That said, after the last rate rise half of savings accounts were unchanged!

“Higher interest rates mean that the BoE believes the UK economy is strong enough to handle a rate rise. It is also trying to control inflation, encourage us to spend a bit less and save more. At 2.4%, inflation is above target but that reflects the effects of the depreciation of the pound following the Brexit referendum. Further hikes will be few and far between because UK economic growth is in a fragile state at the moment.”

 

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