For the first time in more than 10 years the Bank of England (BoE) has raised interest rates. At its meeting on 1 November, the BoE’s Monetary Policy Committee (MPC) voted by a majority of 7-2 to increase the official bank rate from 0.25% to 0.5%.
Although households will face higher mortgage interest payments after the rise, savers should see a modest lift in their returns.
The MPC said that due to record-low unemployment, resilient consumer confidence and rising global economic growth, it thought that it was appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to the target. Accordingly, the MPC voted to increase the bank rate.
In addition to the interest rate increase, the MPC voted to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion; and maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.