Yesterday, for the first time in more than a decade, the Bank of England Monetary Policy Committee voted by a majority of 7-2 to raise UK interest rates by a quarter point, from 0.25% to 0.5%. It was a move that has been well signalled by the Bank in recent weeks and thus it was widely expected by the market.
Source: Bank of England
The rate decision also coincided with the release of both the Bank’s quarterly Inflation Report and press conference. Here are some key takeaways:
Today’s announcement should have a mild positive impact on portfolios, with those at the lower end of the risk spectrum, with higher fixed income allocations, benefitting from the decline in gilt yields that resulted from the more dovish tone. Additionally, the higher risk portfolios would have been bolstered by the unhedged international equity exposure, which benefits from the translation of the weakening of the pound, despite muted returns in local currency terms.
The next UK centric event in the calendar is the budget announcement on the 22nd November and more details can be found on our current thoughts about the UK economy here, but in the interim we will continue to assess the economic and policy outlook, as well as the impact of today’s decision on asset markets and portfolios.