Bank of England's MPC votes 7-2 to maintain Bank Rate Bank of England's MPC votes 7-2 to maintain Bank Rate
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    Default Bank of England's MPC votes 7-2 to maintain Bank Rate

    Taken from the Financial Reporter:

    The Bank of England’s Monetary Policy Committee has voted by a majority of 7-2 to maintain Bank Rate at 0.25%.

    The Committee judged that the lower level of sterling continues to boost consumer prices broadly as projected, and without adverse consequences for inflation expectations further ahead.

    It also expects pay growth to pick up over the forecast period and believes "subdued household spending growth is largely balanced by a pickup in other components of demand".

    The MPC added that since the August Report, "the relatively limited news on activity points, if anything, to a slightly stronger picture than anticipated".

    GDP rose by 0.3% in the second quarter, as expected in the MPC’s August projections, although initial estimates of private final demand were softer than anticipated.

    Twelve-month CPI inflation rose to 2.9% and is now expected to rise to above 3% in October.

    However a majority of MPC members judge that, "some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target". All members agree that any prospective increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.

    Nick Dixon, Investment Director at Aegon, commented: “If employment and inflation inform interest rate forecasting, then both would suggest a rate rise is overdue. Unemployment is the lowest in 42 years and inflation exceeds its 2% target. The challenge, however, is understanding whether inflation is structural or a blip linked to the 2016 decline in sterling.

    “With increasing demand for pay rises to make up declining real income, the inflation challenge is becoming structural. The pressure is on to increase public sector wages to counter inflation, but with a slim majority the government will be wary about matching wage increases with a tax rise. Hence fiscal policy will loosen and monetary policy will tighten to maintain macro-balance. While there has not been a rate rise today, over the next 12-24 months rates will rise higher and faster than market expectations. This will be good news for those seeking annuity income or with cash savings and bad news for mortgage holders.”

    Maike Currie, investment director for personal investing at Fidelity International, added: “It’s now almost a decade since the Bank of England first took the knife to rates and despite talk about a rate hike being around the corner, it comes as little surprise that the Bank of England’s Monetary Policy Committee is still in no rush to raise rates from their historic lows, with a majority 7-2 members voting to hold rates at 0.25%. So despite hawkish sounds from policymakers at the Old Lady of Threadneedle Street, it’s still the doves that rule the roost.

    “Last month, the committee’s message was that interest rates would probably have to rise, and by more than markets were pricing in. But there seems little urgency to tighten, at least outside the small group that favoured a hike. Currently, the economic data paints a mixed picture. While manufacturing numbers look stronger, construction figures have dipped. The jobs market continues to improve, but while unemployment is at a 42 year low, our pay packets are going nowhere."

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    sal 's job has never been outsourced


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    It's only natural - a decade of falling real term wages is forcing more and more people into perpetual debt to pay their monthly bills. Low interest rates are protecting those vulnerable families...

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    Quote Originally Posted by sal View Post
    It's only natural - a decade of falling real term wages is forcing more and more people into perpetual debt to pay their monthly bills. Low interest rates are protecting those vulnerable families...
    Japan!

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    Default Carney: ‘Possibility of rate hike has definitely increased’

    (Taken from Mortgage Solutions)

    The Monetary Policy Committee (MPC) kept rates at 0.25 yesterday but signaled an interest rate hike is looming faster than markets expected, possibly in November.
    The MPC suggested the hike was needed to offset squeezed living standards and sluggish wage growth.

    In a television interview after the decision, Carney said he and the MPC were “beginning to shift” on when to raise rates. “We will take that decision based on the data. I guess that possibility has definitely increased,” he said.

    Financial markets now suggest there is a 42% chance of an interest rate increase in November, up from just 18% a week ago. The odds on a December rise are now 54%.

    The squeeze on households and a strengthening economy mean “some withdrawal of monetary stimulus was likely to be appropriate over the coming months”, the Bank said. It added that a majority of the interest rate setting committee agreed with that assessment, and the governor, Mark Carney, later confirmed that he shared the majority view.

    Sterling spiked to a one-year high following Carney’s comments.

    “Over 2.2 million first-time buyers have bought a home with a mortgage and benefitted from low mortgage costs since interest rates fell to 0.5% in March 2009,” said Shaun Church, director at Mortgage Broker Private Finance.

    Church continued: “Although the Bank of England hasn’t raised rates this time around, the message is clear that consumers should be aware this might happen sooner than expected. When rates do eventually rise, it will be first time over two million people have experienced this as a mortgage holder, and more rises are likely follow.”

    He went on to say that while today’s rock bottom mortgage rates can’t last forever, further base rate rises are likely to be gradual and mortgage rates won’t necessarily rise at the same rate.

    Church explained that homeowners still have plenty of time to prepare for an increase in pricing in the future. “Healthy competition between lenders should ensure that mortgage pricing remains low for some time yet. have plenty of time to prepare for a slight increase in pricing in the coming years.”

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