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Bank of England is likely to raise interest rates faster than expected

09 February 2018

'All this points to rising interest rates, both here in the United Kingdom and in other major economies. The bank also said they expect the British economy to grow by 1.5% yoy.

"Notwithstanding many consumers taking sensible action ahead of the potential rise, my opinion is that this isn't going to have a major impact on the mortgage and property market as whole, because it isn't mortgage rates and the consequent monthly affordability that's causing a bottle-neck". The Bank of England is tasked with setting rates to keep inflation near 2 percent.

The British government has said it hopes to wrap up the outlines of a transition deal by the end of March that will see Britain remain in the tariff-free European single market and customs union for a period after Brexit day in March 2019.

In a press briefing after the bank kept its main interest rate at 0.5 percent, Carney said he wasn't inclined to give a "running commentary" on market moves but that he and others had recently observed that volatility in markets had been "extremely low". In turn, that stimulated economic activity.

On the outlook for Britain's economy, Broadbent said he thought income growth in real terms would return in the current quarter and that inflation was now pretty close to its peak.

Carney said: "We are not talking about going back to those levels".

"Doubling interest rates from one half [of a per cent] is not a terribly big rise", he said. With unemployment at multi-decade lows and the global economy growing strongly, policymakers at the central bank are concerned that inflation is building. That was up from the 1.6 percent given in November. It suggested it could make three quarter-point increases to the key rate over the coming three years, with the first possibly as soon as May.

The Bank of England is sticking to its gradual interest rate plan, and before the Thursday meeting, the financial markets expected interest rates to reach 1.2% by the beginning of 2021.

Unsurprisingly the bank left interest rates on hold at 0.50%, whilst also voting unanimously to maintain the stock of corporate bond and United Kingdom government bond purchases.

Many in the markets think that some sort of agreement over the immediate post-Brexit period will be thrashed out.

With the BoE rate decision out of the way the market will soon be turning its attention to Friday's run of United Kingdom ecostats, with United Kingdom industrial production, manufacturing production, construction output and the highly significant trade balance liable to take centre stage.

Bank of England is likely to raise interest rates faster than expected