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Bank of England deputy governor suggests further interest rate hikes are likely

05 November, 2017, 01:58 | Author: Paula Vaughn
  • UK interest rate rises - but what does it all mean?

Britain's biggest building society, Nationwide, said it would be increasing savings rates by 0.25% for all members who received a reduction of 0.25% as a result of the bank rate reduction in August 2016, including the Society's most popular products.

"For savers, they may see an increase on the rate paid on their deposits".

The simple answer is no, at least not because they haven't immediately passed on Thursday's 0.25% interest rate rise.

Speaking on the BBC's Today Programme Broadbent said: "We have said that given all the other things we assume in our forecast, many of which will be misses - there's always unknown things and unpredictable things happening - but given our outlook now, we anticipate we'll need maybe a couple more rate rises to get inflation back on track while at the same time supporting the economy". Gammon pointed out that interest rates are still historically low.

Barclays and Lloyds' will increase their standard variable rate mortgages - the rate borrowers move onto when their fixed deal ends - by 0.25 percentage points on December 1, to 4.99 and 3.99 per cent respectively.

But it will offer some relief to savers hit by surging inflation and negligible returns.

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The five included Deputy Prime Minister Barnaby Joyce, the leader of the National Party, the junior partner in Liberal's ruling coalition.

Meanwhile, Bank of England Governor Mark Carney has justified the rate rise, saying: "This is part of ensuring that it (the income squeeze) doesn't come back and ensuring that inflation comes back to the two per cent target in a sustainable manner". The Bank of England may only have shifted the base interest rate by 0.25 per cent, moving it back to where it was for almost nine years before the Brexit vote sparked the last cut in August last year.

But sterling fell sharply, down more than 1% to $1.31 and €1.12, as the Bank's comments over future rises were more cautious than expected.

The Bank of England's US counterpart, the Federal Reserve, voted Wednesday to leave key interest rates unchanged.

She would still recommend to clients thinking about borrowing to lock into a fixed-rate mortgage given this is likely the first of several gradual increases to the base rate, she said. More are in work than ever before. "New fixes [fixed-rate mortgages] are already a tad costlier as the market's anticipated rate rises; yet for now, deals are still incredibly cheap".

Mr Carney added that monetary policy would continue to provide "significant support" to the economy.

The Bank raised rates from 0.25% to 0.5%, the first hike in 10 years.

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