020 7898 0500UK interest rates were increased by 25 basis points yesterday in a move that was largely expected. However, comments that followed caused sterling to weaken sharply against the euro and US dollar, as Governor Mark Carney and the rest of the Monetary Policy Committee urged caution. In many ways, the central bank were forced into making the decision – strange, how a bullish move can be done in a bearish way.
The vote was 7-2 in favour of a rate hike, with Sir Jon Cunliffe and Sir Dave Ramsden the only two MPC members who decided against increasing rates. Recent UK economic data encouraged the increase, as well as rising inflation. However, not everybody thinks that increasing rates is a good idea, as the positive growth figures could prove to be temporary and UK households are already feeling the pinch owing to slowing wage growth. The 5,000,000 British people with variable rate mortgages will now pay more.
The fallout from the decision is set to continue and we expect some significant sterling volatility over the coming days and weeks. Today we have the Markit services purchasing managers’ index figures.
