UK interest rates: Experts react to Bank of England raising rates for first time in a decade

Where will the Bank go from here? Are more increases on the cards? Or is Brexit too much of a worry?

The Bank of England has raised interest rates for the first time in over a decade (AFP/Getty)

The Bank of England has raised interest rates for the first time in over a decade. But where will it go from here? Are more increases on the cards? Or is Brexit too much of a worry?

Here’s a look at how economists, investors and other experts are reacting.

Adrian Hull, co-head of fixed income at Kames Capital

“The hike to 0.5 per cent was widely anticipated – but more interestingly - what next? [Mark] Carney and the [Monetary Policy Committee] would like to have some flexibility but as the short press statement reminds us, they are as much in the dark about the economy up to and after Brexit as the market is.

“Six of the eight paragraphs refer to the impact of Brexit on their decision which was voted 7-2. Don’t expect anything as emphatic as rates aren’t going up again soon but the essence of the sentence ‘All members agree that any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent’ is clear.

“Rates are set to stay low and uncertainty prevails, while the move in gilts which have shot higher in price after the midday announcement gives an insight into the market’s thinking. This rate cycle is set be a long and protracted affair.”

Iain Lindsay, co-head of global portfolio management for fixed income at Goldman Sachs Asset Management

“In our view, external rather than domestic drivers have supported the UK economy since the Brexit outcome, with global, and in particular European, growth surprising to the upside.

“As these drivers begin to fade, we think weaker business investment and slower migration flows could weigh on both the growth and inflation outlook, providing we do not experience renewed weakness in the British pound. And although UK inflation remains above the BoE’s 2 per cent target, we think market pricing overstates the pace of monetary tightening.”

Brian Coulton, chief economist at Fitch Ratings

“This is all about unwinding the easing after the Brexit vote in the face of the sharp rise in inflation, there is no intention to slow the economy. But there’s simply not enough slack in the labour market for the BOE to feel they can tolerate above target inflation.

“We don’t expect further rate hikes for the next 12 months or so given the impact of Brexit uncertainty on the outlook for investment. A 25 basis point hike is unlikely to have much impact on the economy but the change in the narrative is more meaningful – people are now having to start to think about the risk of interest rates rising over the next few years, something that may have seemed completely off the table for a long while.”

Azad Zangana, senior economist at Schroders

"While many are asking whether this interest rate rise will have much of a negative impact on growth, the more important question is whether the MPC sees this as a one-off rise, or whether this is the first of many.

“This first rate rise will undoubtedly burden those that are struggling to make ends meet, but for the vast majority, it will have a small impact. That said, it is unhelpful when wages are struggling to keep up with inflation, and when growth is slowing."

Anthony Doyle, fixed interest investment director at M&G Investments

“Today’s move by the Bank of England’s Monetary Policy Committee can be described as a ‘weak hike’ and may prove to be a one-off adjustment. The increase in the bank rate is difficult to justify given the ongoing political uncertainty that surrounds Brexit and the slow progress of negotiations between the UK and the EU.

“We expect to see increasing signs of slowing investment, falling consumer confidence and economic weakness unless a material agreement or transitional deal can be reached on the future UK-EU trading relationship. However, the MPC clearly has a different view, and are worried that there is limited spare capacity in the economy which may lead to higher wages and above-target inflation.”