BoE Hikes Rate to 0.75% and Raises Economic Growth Forecasts
As widely expected, the Bank of England raised interest rate at its today’s meeting. The BoE’s Monetary Policy Committee voted unanimously to raise rates by a quarter of a percentage point to 0.75% from 0.5%, which is the highest level since March 2009. The UK central bank also noted, that “any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.”
The Bank of England raised its economic growth forecasts for 2018 and 2019. UK GDP will grow by 1.5% in 2018 and by 1.8% in 2019. Inflation will return to target 2% in 2020. Still, the BoE warned that Brexit could damage the economic recovery.
Recent data has indicated that the UK economy is showing signs of recovery after growth slowed to near stagnation at the start of the year, while the labor market remains resilient, even though wage growth is moderate. The annual rate of inflation is currently running at 2.4%, slightly above the BoE’s target of 2% after falling back from its peak of 3.1% in November.
The pound rose after the Bank of England raised the key interest rate and raised economic growth forecasts for 2018 and 2019. The GBP/USD pair added about 50 points and is currently trading at $1.3090.