BOE MPC raises interest rates by 0.25% to 0.50%

worldtraveller

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 1 November 2017, the MPC voted by a majority of 7-2 to increase Bank Rate by 0.25 percentage points, to 0.5%. The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion. The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.

Bank of England

Shocker!

Filo25

Forward guidance a bit more dovish than the markets seemed to be expecting though based on Sterling selling off a bit.

Eric_the_half_a_bee

Filo25 wrote: »

Forward guidance a bit more dovish than the markets seemed to be expecting though based on Sterling selling off a bit.

Does that mean we will have to wait until next month for a catastrophic collapse in house prices?

michaels

When rates came down mortgage lenders stopped passing on the decrease to SVRs at a base rate of about 2.5% so the gap between base rate and svr that had historically been 2% has jumped to 4%.

What will happen on the way up? Will the current historically large gap between the base rate and the average SVR be maintained or will this gap also 'return to normal' levels?

obay

Are they going to stop QE?

michaels

obay wrote: »

Are they going to stop QE?

Nope, no new qe for a while but no plans to reduce current stocks of £10bn corporate bonds and £435bn govt bonds

antrobus

michaels wrote: »

Nope, no new qe for a while but no plans to reduce current stocks of £10bn corporate bonds and £435bn govt bonds

Yes. The APF is still at £435 bn. The BoE has been topping it up, as the gilts in the existing portfolio mature, but otherwise no change.since the extra £60 bn in August 2016.

Thrugelmir

obay wrote: »

Are they going to stop QE?

Following the US curve. A couple of years hence yet.

Thrugelmir

michaels wrote: »

What will happen on the way up? Will the current historically large gap between the base rate and the average SVR be maintained or will this gap also 'return to normal' levels?

Large gap simply gives lenders flexibity. Should base rates jump up rather than be incremental increases. Still in uncharted monetary policy waters.

GreatApe

In theory the 2020-2030 period should be a decade of low price inflation as the near AI software revolution kicks in making goods and services a good deal cheaper.

michaels

But can't we draw an exact analogy with energy suppliers standard variable tariffs - ie higher prices for those who can't or won't swap around. Given this is politically unacceptable for utilities I can't see it will be long before the same happens with mortgages.