Despite a recent close vote, interest rates are unlikely to be rising any time soon.
Last month saw the first ‘suggestions’ that interest rates could increase soon.
Source: The Federal Reserve
In June, the US Federal Reserve increased short term interest rates for the second time this year and for the fourth time since December 2015. The 0.25% increase, to a target range of 1.00% − 1.25% had been well signalled by Fed officials, so there was no surprise.
However, as seems to be the case these days, the focus was more on whether the next rate rise was still three months away or whether it might be deferred.
The day after the US interest rate decision it was the turn for the Bank of England, to make its announcement.
This was universally expected to be another “no change”, leaving base rate at the 0.25% fixed amidst post-referendum concerns last August and, indeed, the rate did remain unmoved.
There was nevertheless a major surprise: three out of the eight people charged with setting the rate voted for an increase. According to Reuters, this was the nearest the Bank has come to raising interest rates since 2007.
Not so fast…
Does that mean the Bank’s next meeting might see the first rise in interest rates in a decade? The answer is probably no. One of the trio of ‘rate risers’ will have left the Monetary Policy Committee by the time of the next meeting. Her replacement is thought to be less anxious to raise rates. A new deputy governor is also due to be appointed, bringing the Committee up to its normal quota of nine. The balance of the Committee is set to change.
Despite some apparent differences between the Bank’s governor, Mark Carney, and its chief economist, Andy Haldane, most experts still do not see the first base rate increase happening until 2018.
Keith Bonner, Director and lead Independent Financial Adviser at HSC Financial Services says “That is good news if you have a variable rate mortgage but bad news if you have a deposit account or cash ISA. Why not call us for a review or your Savings and Investments?”
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