Bank of England raises Bank Rate to 0.75%

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Policy stance would remain "neutral".

The Bank's Monetary Policy Committee agreed unanimously to increase the base rate from 0.5 to 0.75 per cent, adding around £190 a year to the average variable-rate mortgage.

In terms of inflation, RBI said, it is projected at 4.6 per cent in second quarter, and 4.8 per cent in the second half of 2018-19.

Minutes of the Bank's rate meeting signalled there would also be further rises to come as policymakers look to bring inflation back to target, although they continued to stress that these would be "gradual" and "limited".

Charlotte said: "Today's rate decision is a beacon of hope for savers, who have grown exhausted of the low rates that have plagued them for so long".

"The RBI did not change its policy stance in June due to the various uncertainties they faced and the degree of uncertainty has gone up considerably compared to the last policy, so they would continue to retain the neutral stance", she said.

"Longer term fixed rates are likely to be more popular now among borrowers as they try to protect themselves from future base rate rises".

It is only the second time the MPC has increased rates since the financial crisis 10 years ago. The following hike in the repo rate at two consecutive policy meetings by the central bank comes after the hikes it had made in October 2013. Experts believe that the central bank can increase interest rates. With a general rise in the interest rate in the financial system, the EMIs you pay on your home and auto loans have been rising.

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The BoE has been preparing the market for a rate rise during 2018.

James Smith, an economist at ING, said: "Despite the Bank's optimistic outlook, we think policymakers will find it tricky to hike rates again before Brexit".

In the minutes of the MPC's meeting, the Bank said: "Recent data appeared to confirm that the dip in United Kingdom output in the first quarter had been temporary, with momentum recovering in the second quarter".

Several economists had challenged the need for a rate hike now, given not only the Brexit risks but also the potential damper on global growth from U.S. President Donald Trump's tariffs on imports, and counter-moves by other countries.

The statement noted that "fuel and light group" inflation rose sharply in the period since the previous policy review, pulled up by liquefied petroleum gas (LPG) and kerosene prices.

The pound fell 0.5% against the USA dollar and 0.2% versus the euro, despite the rate rise and unexpected unanimous backing of the MPC for the move. Nearly all (96%) of new mortgage loans are offered on a fixed rate, usually for the first two or five years.

"Subsiding consumer and business confidence, especially in forward looking gauges, together with the responses to the Ipsos Mori opinion poll, suggest strongly in our view that private sector economic agents are increasingly and demonstrably not behaving in this way", Wraith concluded.

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