The Bank of England has increased the UK interest base rate from 0.50 per cent to 0.75 per cent, the highest level since March 2009.
This is the second rate rise in a row, the last happening in November 2017, when it was pushed from 0.25 per cent to 0.50 per cent. It is also the first time the rate has stood at 0.75 per cent.
The nine members of the bank’s Monetary Policy Committee voted unanimously for the increase.
The minutes also show that, “all members agreed that any future increases in [the] bank rate were likely to be at a gradual pace and to a limited extent.”
Commentators have not been surprised by the widely speculated move.
Aberdeen Standard Investments investment strategist Luke Bartholomew says: “It is almost unthinkable that the Bank of England will follow up with further rate rises in the next few months given the risks on the horizon.”
Bartholemew says: “The most ominous of these risks is Brexit. The bank is basing its assumptions on the UK having a smooth transition from the EU and that’s a pretty big assumption at the moment. The other big uncertainty is the UK’s chronically weak productivity, which will ultimately determine how fast the economy can grow without stoking inflation.”
Quilter retirement policy head Jon Greer says it will be interesting to see if the rate rise will pull people back to annuities.
He says: “Annuities fell out of favor following pension freedoms. However, the interest rate rise could be good news for those seeking a guaranteed income and are on the verge of retirement. However, the knock on impact to annuities may not be immediate.”