Interest Rates: What The Rise Means For Your Household

Eileen GuzmanAug 03, 2018

The Reserve Bank of India on Wednesday raised its policy repo rate as expected for the second straight meeting, citing inflation concerns but retained its "neutral" stance.

The first hike in the current cycle of rising interest rate trajectory was in June when the repo rate was increased from 6 per cent to 6.25 per cent.

Meanwhile, reverse repo, the rate at which the central bank borrows money from commercial banks within the country, was adjusted to 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent.

The Bank of England has increased interest rates to their highest level for almost 10 years after the summer heatwave helped the economy bounce back from a snow-hit start to the year.

The Scottish Fiscal Commission, which determines the spending envelope for the Scottish Government, has forecast Scotland's GDP growth will stay below 1 per cent for five years.

The Bank of England has raised interest rates to 0.75% today, the first time it's been above 0.5% since the financial crisis a decade ago.

Kathleen Brooks said that one of the main things to look for will be the "mechanics of the rate decision", particularly with regard to how the vote goes in terms of who votes for what.

Institute director Professor Graeme Roy said: "The interest rate rise - to the highest rate since 2009 - marks an important milestone in the UK's recovery from the financial crisis".

From the six committee members, as many as 5 voted for the rate hike. He said the rate hike came on the heels of a meeting with Union Housing and Urban Affairs Minister Hardeep Puri to discuss measures to put real estate sector "back on track".

It is very unlikely and investors certainly do not expect another rise for about a year.

The Bank confirmed in the minutes that an "ongoing tightening of monetary policy" would be needed to rein in inflation over the "more conventional" two-year horizon, if the economy grows in line with its forecasts. Additionally, CPI inflation was also pushed above its 2% target to 2.4% in June.

"However, with earnings growth remaining weak, the's increase has the potential to weaken consumer spending and dampen growth".

The majority of foreign exchange analysts maintain a cautious approach to Sterling, with many warning that any gains coming from the August rate rise will likely prove short-lived.

Cheaper mortgage deals in recent years have also encouraged people to lock in promotional rates. MCLR hikes, however, will not immediately impact most existing home loan borrowers as they will continue to pay their existing lending rates till the next reset date of their loan.

EUR/GBP at 0.90 gives a GBP/EUR exchange rate of 1.11.

Iain Lindsay, co-head of global portfolio management within the global fixed income team at Goldman Sachs Asset Management, said "today's rate hike is a significant, albeit not an unexpected move".

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