At last

Thursday 2nd November 2017

The most expected interest rate decision I can remember. That’s probably worthy of some other essay about how independent from the consensus central banks really are – but not now.

A symbolic hike which will make half the mortgage borrowers who are on variable rates about £180 a year worse off – the other half on fixed will have to bear the pain later on. Savers should take heart, not from the tiny  increase in the interest rate but from the coming closure of the government cheap money schemes to keep the banks afloat is coming to an end. Which will make banks and building societies much hungrier  to compete for  savers.

I was on the Jeremy Vine show on Radio 2  – my forward view was that the markets are banking on a couple more similar rises into 2019. Therefore up to 1%. Inflation is at 3% – earnings have only risen by 2%, so there’s still going to be a stranglehold on consumer spending. However, this interest rate rise is a sort of vote of confidence vote in the UK economy.

It did not plummet after the exit vote last year, as many predicted. It’s not growing as fast as the Eurozone’s France, Germany and Spain as measured in the third quarter of the year – but our competitors are climbing from lows, playing catch up. Since the beginning of the euro, the UK has grown  40% against a Eurozone average of 28%.

It’s true that government polices have done little to redress the gap between rich and poor – I’ve never seen that phenomenon. But this interest rate rise will say something to our overseas investors. Love them or hate them,we need them. It says that the economy is fundamentally sound and that we are confidently joining the club of the major economies which are trying to wean their populations off the tap of cheap credit. The never never is very appealing   – but we are moving into the here and now..and like it or not, that’s going to be more expensive.


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