With a sense of irony based on yesterday’s article about the increase in the UK inflation rate which can be found HERE, the Bank of England has announced it has increased the interest rate back to 0.5%
And the reason why is?
With the recent Brexit negotiations (if you can call them negotiations, and not Theresa May nodding along to everything that is discussed) it was pretty much confirmed that the rights of EU citizens had been secured both for those living in the UK, as well as Brits living in other European countries. It was also verbally ‘agreed’ that trade talks will also commence following the UK’s exit from the European Union. As the UK is unable to sign any sort of deal as such until it is no longer a member of the union, it formed a verbal agreement.
So, with these promises, there is an assurance that EU workers rights will be protected post Brexit. This gives European firms and citizens based within the UK confidence as they will not be forced out of the UK and firms can continue to operate in the financial capital of the world. Therefore, it is essentially smart to bring the interest rate back up to 0.5%.
Confidence is essential.
Corporate and household confidence will undoubtedly be boosted by the announcement of the Brexit negotiations.
The rate being brought back up to 0.5% isn’t a huge deal at this time, but the Bank of England looks set to push the figure even higher. This will give savers a bigger lift as high street banks will be all but forced to raise their rates of interest, combined with the Bank of England’s promise that the inflation rate has all but reached its ‘peak’ at 3.1%, the target is clear that it wants the UK to gradually steer away from such low interest rate figures.
But, with all Brexit negotiations still not completely finalised, and written on paper, it is hard to tell whether this is the way it will stay in the next few quarters.
As always, we never really know what will happen, until the whole thing is finalised.