UK rates move up by 0.25%. This was widely anticipated – but more interestingly – what next?
Carney and the MPC would like to be have some flexibility but as the short press statement reminds us – they are as much in the dark about the economy up to, and after, Brexit as the market is. Six of the eight paragraphs in the statement refer to the impact of Brexit on their decision, which was voted 7-2.
They have not said anything as emphatic as ‘rates aren’t going up again soon’, but the following sentence does hint at that outcome : “All members agree that any future increases in the Bank Rate would be expected to be at a gradual pace and to a limited extent.” Rates are set to stay low, uncertainty prevails and gilts shooting higher in price after the midday announcement gives an insight into the markets thinking. This rate cycle is set be a long and protracted affair.