Bank of England raises interest rate for first time in 10 years

The Bank of England raised the interest rate in Britain Thursday for the first time in 10 years.

Bank of England Governor Mark Carney speaks at a news conference in London Thursday, as the institution its first interest rate hike in a decade. Photo by Andy Rain/EPA
Bank of England Governor Mark Carney speaks at a news conference in London Thursday, as the institution its first interest rate hike in a decade. Photo by Andy Rain/EPA

The bank’s Monetary Policy Committee lifted the benchmark rate from 0.25 percent to 0.5 percent — the first hike since 2007. The central bank lowered the rate in August 2016 from a half point.
The bank’s committee voted 7-2 to increase the rate, which has remained under 1 percent since 2009. Rates have dropped significantly from a high of 5.7 percent in 2007. A year later, the lowest was 2 percent, according to BOE data.

“The decision to leave the European Union is having a noticeable impact on the economic outlook,” Bank of England said in a summary. “Uncertainties associated with Brexit are weighing on domestic activity, which has slowed even as global growth has risen significantly.”

The committee linked the increase to Britain’s unemployment, which is at a 42-year-low of 4.3 percent — and economic growth is forecast 1.7 percent over the next three years.

In September, the Consumer Prices Index inflation rose to 3 percent — the highest rate since 2012 — but the committee expects it to fall to 2 percent next year.

Bank governor Mark Carney said he expects banks to pass on the rate increase to savers, but doesn’t expect mortgages, loans and credit cards to immediately increase.

The Bank of England’s U.S. counterpart, the Federal Reserve, voted Wednesday to leave key interest rates unchanged.

By Allen Cone