Bank of England Raises Interest Rates to Highest Level Since 2009

Bank of England Raises Interest Rates to Highest Level Since 2009

The BoE said it saw "tentative signs that actual and prospective protectionist policies were starting to have an adverse impact" on global trade.

Bank deposits at Rs 114.8 lakh crore grew by 0.5 percent during April 1- July 18 compared with a contraction of (-) 1.5 percent growth in the corresponding period a year ago. Throughout his tenure as governor, Carney has faced accusations of being a so-called "unreliable boyfriend", frequently promising rate hikes and then ultimately failing to deliver. Headed by governor Urjit Patel, the central bank raised key policy rates to the highest in two years for the second time in a row in last two months to tackle inflationary pressures.

Some economists have raised doubts about the case for the rate hike. "We look up at components but we focus on improving the overall headline".

The BoE nevertheless said the economy was now operating at nearly its "speed limit", or full capacity, raising the prospect of more home-grown inflation pressure ahead.

The theory is that no interest rate rise might have pushed the inflation rate higher, which in turn could have eventually fed through to student loan rates. There is some volatility in global financial markets.

The Reserve Bank of India on Wednesday raised interest rates for the second straight meeting, but retained its "neutral" stance as it aimed to contain inflation while not choking growth. Impact on Small Savings Scheme With two consecutive hikes in the repo rate, taking it to 6.50 percent, there is now a heavy expectation of an increase in small savings returns. "We urge the government to expedite lowering effective GST on all housing to 8 per cent so as to preserve the growth impulses in real estate". "Many things are in our favour".

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It has become an even closer call after survey figures on Wednesday signalled a weaker performance from the manufacturing sector in July, according to Mr Archer, but he said this is "unlikely to deter" the MPC from raising rates. The central has also projected the GDP growth for first quarter of the next financial year at 2019-20 at 7.5 per cent.

"Weather effects - both the snow-related disruption in February and March and the unseasonably warm weather and long sunshine hours in May and June - seemed to have accounted for around half of the second quarter rise", it added.

Worth mentioning here is that retail inflation, which is factored in by the MPC, soared to a five-month high of 5 per cent in June on elevated fuel price.

However, the policy committee signaled that it was in no hurry to raise them further with an uncertain Brexit on the horizon. Any increase in the Bank rate should result in higher gilt yields, which will in turn lead to higher annuities.

The repo rate is the rate at which the central bank of the country lends funds to the commercial banks.

Meanwhile, the Sensex fell almost 120 points to 37,440 after RBI policy decision but recovered later to trade around 50 points lower at 37,556 level.

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