Interest rates up for the first time since 2007

BRITAIN-POLITICS-ECONOMY-FINANCE-BOE

BRITAIN-POLITICS-ECONOMY-FINANCE-BOE

The increase in the Bank rate was widely expected but marks a watershed moment after years of rock-bottom borrowing costs.

The Bank highlighted that many families have taken out these types of mortgages in recent years - almost 60% of outstanding home loans are tied to a fixed-rate.

Interest rates were adjusted from 0.25 per cent to 0.5 per cent in a bid to keep a lid on inflation.

So, the ultimate "dovish" hike, to which sterling reacted quickly and decisively.

"Overall, the Bank may have hiked rates, but the outlook is cautious and downright weak regarding the strength of the United Kingdom economy", said Kathleen Brooks, research director at City Index.

But the immediate impact of the rate hike will be less widespread than it would have been in prior years as a growing number - now 4.4 million - were on fixed rate deals. Economists are much more sceptical, and most do not expect rates to rise at all next year. The number who actually do so this month will be key for market expectations of a future rise.

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The Bank expects the United Kingdom economy to keep expanding at a steady pace over the next few years.

Growth in Spain, for instance, is twice that of the United Kingdom right now.

A man speaks on his mobile phone outside the Bank of England in London, Britain, October 17, 2017. Spanish GDP growth is 0.8% - twice the rate of the UK.

British consumers have felt a squeeze on their incomes this year as the fall in the value of the pound has push up prices for goods and services.

The Bank is tasked by the Government with keeping CPI at 2%, but has been tolerating higher inflation amid uncertainty caused by the Brexit vote to prevent shocks to the economy.

The Bank of England said it expected inflation - already at a five-year high of 3% - to peak at 3.2% in the coming month and for economic growth to remain subdued in the coming years. The Bank believes unemployment is likely to fall further from its current four decade low of 4.3% to around 4.2% by the end of the year.

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It explained its decision saying "uncertainties associated with Brexit are weighing on domestic activity, which has slowed even as global growth has risen significantly".

The weaker pound boosted dollar earners on the FTSE 100, which closed just one point shy of its record high at 7555.

Business investment is now expected to grow by 2.5% this year, more than double its previous estimate of 1%.

Retail banks tend to pass on any change in the BoE rate to its customers.

The pound was down 15 percent since the June 2016 Brexit referendum and threatening to lurch to new historic lows; inflation was taking off; real wages were once again falling; and all the while the economy was slowing noticeably amid Brexit-related uncertainty - Britain was the slowest-growing economy of all 28 European Union countries in the second quarter.

Fed keeps interest rates unchanged
Advancing issues outnumbered declining ones on the NYSE by a 1.09-to-1 ratio; on Nasdaq, a 1.69-to-1 ratio favoured decliners. Japan's Nikkei rose 0.2 per cent, probing fresh 21-year highs and on track to gain 2.3 per cent in a holiday-shortened week.

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