Yesterday we saw the UK’s monetary policy committee (MPC) hike UK interest rates by 0.25% taking UK interest rates to 0.75% the highest level seen since 2008. Whilst the decision was in line with market expectation of a hike, the fact that the UK’s MPC members voted unanimously 9-0 (expected 7-2) that the UK economy was strong enough to deal with higher interest rates.
The committee commented that some below expectation data at the start of the year was temporary and caused by a particularly bad winter. Economic data in the second quarter of 2018 has bounced back, showing the strong progress they predicted for the UK economy.
When asked about employment levels in the UK Mr Carney added "Both the employment rate and number of vacancies are at record highs, and job-to-job flows are back around pre-crisis levels.".
The MPC predicted that GDP could increase by 1.75% and unemployment could fall below 4% later this year. If we add in the improvement of earnings in the UK, it was evident that the economy was strong enough to deal with a hike. The progressive interest rate policy is warmly welcomed by savers and investors into the UK.