Bank of England hikes interest rates to 0.75%

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While Repo rate is the rate at which the central bank lends money to the banks, the reverse repo rate is the rate at which banks lend money to the RBI.

With two back-to-back rate increases, even banks expect to pass on the higher cost of funds to their customers. "For example, the average five-year fixed rate has increased by just 0.05% since November 2017 stand at 2.93% today".

Saver or borrower? Interest rates have risen.

"They can expect a rise to their savings, albeit a small one".

Why are they doing this now?

In June, the repo rate or the benchmark lending rate was raised for the first time in over four years, by 25 basis points to 6.25 percent.

Mr Brown believes the economy has performed in line with the Bank's last forecasts in May, when it backed off from a widely anticipated hike to wait and see how the economy recovered after a weather-hit start to the year.

A Bank rate rise does not guarantee the equivalent increase in interest paid to savers.

But Carney said there was a wide range of outcomes for Brexit - most of which would require rates to be at least as high as now - and that the central bank was working on the assumption that there would be a smooth transition.

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Bank deposits at Rs 114.8 lakh crore grew by 0.5 percent during April 1- July 18 compared with a contraction of (-) 1.5 percent growth in the corresponding period past year.

Another bullish driver for Sterling is the upgrade to forecasts for inflation and growth contained in the Inflation Report. Retail sales were weak in June, the housing market is dead and inflation is coming back towards its 2% target more quickly than the Bank expected.

The Bank sees some clouds on the economic horizon.

It also highlighted a slowdown in the United Kingdom housing market this year, which has been "concentrated in London", where mortgage completions are down 12% on 2016.

"We think the bank wants to raise rates in a gradual way and that would be consistent with the next one in February", he said.

The BoE said the economy "could be influenced significantly by the response of households, businesses and financial markets" to news on Brexit.

The decision to raise interest rates means the UK's basic interest rate is finally raised off the floor that was put in place in the wake of the global financial crash and ensuing recession.

It also seems unlikely the United Kingdom will return to interest rates of 5% and above. Investors looking for risk-free, guaranteed returns may continue to invest in PPF, NSC, Sukanya Samriddhi, Post Office Savings, etc. Impact on 10-year G-sec yieldThe maintenance of the neutral stance cooled bond yields after the policy announcement, as the rate hike itself was already priced in.

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