In a move which was widely anticipated, the Bank of England has announced it has raised its official rate by 0.25% to 0.50%. It is the first increase in Britain’s official interest rate since July 2007.
The Bank’s Monetary Policy Committee (MPC) determines the interest rate and it comprises nine members, of which four are external to the BoE. The MPC vote was 7-2 in favour of an increase in the U.K. official interest rate, known as “Bank Rate”.
According to the minutes of the meeting, unemployment is at “42-year low and the MPC judges that the level of remaining slack is limited.” However, there is a sting in the tail. The MPC expects GDP to grow “just above its reduced rate of potential.”
The BoE has consistently pointed to uncertainties surrounding Brexit and its negotiations since the 2016 vote and it repeated these concerns again in its statement. “There remain considerable risks to the outlook, which include the response of households, businesses and financial markets to developments related to the process of EU withdrawal.”