UK: Bank of England raise rates

On the 2nd of August, the Bank of England (BoE) announced that it would be raising interest rates from 0.5% to 0.75%.

This move followed the increase from November 2017 and marks only the second rise in the last decade. The BoE expects additional limited rises to occur gradually over the next few years, although rates could also fall again if Brexit has a more negative impact on the UK economy than expected.

The rise comes as part of the BoEs effort to return rates to a more ‘normal’ level, currently believed to be around 2-3%, as well as concerns that low unemployment and poor productivity growth are making it difficult for the economy to grow without driving up inflation.

The response of banks and financial institutions remains to be seen, although it is likely to lead to some activity in the savings and mortgage markets as consumer look to ensure they are still getting the best rates.

RFi Group data shows that a 0.25 basis point rate rise could cause over half of all savings account holders to take some action, such as increasing their savings, switching their savings account provider, or moving spare funds from current accounts to savings accounts.

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