UK rate rise: BoE governor Carney defends decision, pound sinks - as it happened
The Bank of England has voted to hike borrowing costs for the first time since July 2007
- Pound falls, FTSE 100 rises after BoE decision
- Carney defends rate hike
- What the interest rate rise will mean for you
- Why has the Bank of England increased interest rates? It was the only option left
- The Bank of England could no longer bottle it over an interest rate rise
5.59pm GMT
The slump in the pound as the Bank of England hinted any further rate rises were not imminent helped push the FTSE 100 just shy of a new record close.
Sterling continues to suffer, after Mark Carney insisted that future rate rises would be gradual and limited.
The pound is dropping after the Bank of England hiked interest rates https://t.co/Czc4ub6XnK pic.twitter.com/281tG7EUwe
5.41pm GMT
Today's market reaction to the Bank of England's rate decision shows how difficult it is to judge how events will be received, says Laith Khalaf, senior analyst at Hargreaves Lansdown:
The market has delivered yet another salutary lesson on why not to invest on the basis of macro-economic events like an interest rate rise. Even if you guess the right outcome, predicting the effect on asset prices is a different ball game.
In theory an interest rate rise should be positive for the pound and the banking sector, and negative for gilts and the FTSE 100. Today the pound fell, as did Lloyds and RBS shares, while gilts and the broader Footsie rallied, turning the investment textbook on its head.
5.28pm GMT
The Economist Intelligence Unit also expects the next UK rate rise to be delayed:
After today's hike we expect #BoE to go into wait-and-see mode. Even if data is firm, will avoid policy fine-tuning. Expect next one in 2019
5.11pm GMT
The UK interest rate rise should not have a huge impact on the economy, and there is not likely to be another increase in the next year, says ratings agency Fitch:
The Bank of England's (BoE) decision to increase UK interest rates by 25 bp partly unwinds the monetary stimulus it provided last summer, and is unlikely to have a large economic impact. The BoE looks set to tighten policy slowly, but the first UK rate hike in over decade highlights how shrinking output gaps and tighter labour markets are pushing central banks towards interest rate normalisation...
Fitch has for some time been expecting the post-referendum interest rate cut to be reversed, although in our most recent Global Economic Outlook (September 2017), we expected this to happen in early 2018. The MPC summary said that all members agreed that future increases "would be expected to be at a gradual pace and to a limited extent," and that monetary policy "continues to provide significant support to jobs and activity."
5.05pm GMT
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4.39pm GMT
The FTSE 100 has closed, and it didn't quite make a new record.
The index is up 0.9% at 7555.32, less than a point below its all time closing high set on 12 October.
4.28pm GMT
The pound has been falling on the basis that the Bank of England's rate rise is a dovish one, and further increases are not likely in the near term.
But Capital Economics believes the markets may be underestimating the situation:
We continue to think that the markets are underestimating how quickly rates will rise in the UK, though, as the economy weathers the uncertainty over Brexit well. Only one further 25bp increase is discounted in the overnight indexed swap (OIS) market between now and the end of 2018, whereas we anticipate that there will be three - taking Bank Rate to 1.25%.
Admittedly, investors might be anticipating rather more tightening next year than is implied by OIS rates. This is because the future overnight rates implied by these financial market instruments include term premiums, which may be negative.
Sterling likely to recover, as Bank of England proves not so dovish after all. See our Daily: https://t.co/PA6107qWvj
4.06pm GMT
The continuing fall in the pound has re-energised the FTSE 100, which is packed full of overseas earners who should benefit from a weaker sterling.
The leading index is now up 0.8% at 7553, and while that is well below the intra-day peak of 7598, it is not far off the record close of 7556. And there is only another half an hour or so of trading to go.
3.50pm GMT
It's not getting any better for the pound.
It is now at a three and a half week low against the dollar, and on track for its biggest one day fall against the euro in 13 months.
3.23pm GMT
Back with the UK rate rise, and Amit Kara, head of UK macroeconomic forecasting at thinktank the National Institute of Economic and Social Research, said :
The MPC voted 7-2 for a 25 basis points increase in Bank Rate, thereby reversing one of the three stimulus measures injected by the Bank last August in response to the EU referendum result. The economy has performed better than the Bank's post-Referendum forecast with economic growth stronger and unemployment lower. Inflation however, has exceeded the target and is now set to rise above 3 per cent in October. Although better-than-expected, economic growth overall is subdued compared with history.
The MPC has also signalled a gentle rate hiking path that is similar to our forecast published yesterday. We expect the policy rate to rise by 25 basis points every six months until the Bank Rate reaches 2 per cent in 2021.
3.13pm GMT
US markets have made a cautious opening, as investors digest a summary of the Republican's proposed tax reforms, which include slashing corporate tax rates. More details are due shortly.
There is little else on the economic agenda, although the President's choice for the next Federal Reserve chair is due to be announced later. Craig Erlam, senior market analyst at Oanda, said:
The BoE's job may be done for the day but the fun may be just beginning for markets, with details of Trump's tax reforms and the new Fed Chair announcement still to come. Jerome Powell is expected to be announced as Janet Yellen's successor late on in the session which will leave another seat available on the Board of Governors for Trump to fill. Certain candidates may have missed out on the position of Chair but with other important roles to be filled, there's potential for them to join Powell at the top.
3.06pm GMT
Here's an interesting stat from M&G investment director Ritu Vohora looking at how savings and investments have performed since the last rate hike:
Our calculations show that 1,000 saved into a regular savings account in July 2007, the last time we had an interest rate hike, would be worth just 789 today in real terms, while the same sum invested in the FTSE All Share could have grown to 1,297 after accounting for inflation.
2.57pm GMT
Some banks have already begun announcing their own rises following the Bank of England's base rate increase from 0.25% to 0.5%.
Yorkshire Building Society says standard variable rate mortgages will rise by 0.25% to 4.99% but its Accord mortage rates fall from 5.34% to 4.99%.
2.32pm GMT
Here's an analysis of the rate rise by our economics editor Larry Elliott:
It's been a long, long time coming. The last time the Bank of England raised interest rates in July 2007, Sir Mervyn King was in charge at Threadneedle Street, Barack Obama had only recently said he would run to be US president and Gordon Brown had finally replaced Tony Blair as prime minister.
Official borrowing costs are now back to where they were between early 2009 and August 2016, when there was an emergency cut in rates following the Brexit vote. The recession the Bank feared did not materialise and so - with inflation above its 2% target and the unemployment rate at its lowest in more than four decades - there has been a modest tightening of policy.
Related: The Bank of England could no longer bottle it over an interest rate rise | Larry Elliott
2.23pm GMT
Sterling is still on the slide despite the UK rate rise, following the Bank's comments that any further increases will be gradual and limited.
Against the dollar, the pound is down 0.97% at $1.3116, while against the euro it is 1.45% lower at a1.1233. The sterling index in on track for its biggest one day fall in almost five months, according to Reuters, down 1.3%.
2.04pm GMT
Right, a recap is in order.
"Today's hike is a hammer blow for those in problem debt, whose repayments will now rise.
"The Bank of England has made the wrong call - but the government must not hide behind it.
Bank of England's trade-weighted sterling index on course for its biggest one-day fall in almost 5 months pic.twitter.com/hGDbgzeGuT
"To be clear, even after today's rate increase, monetary policy will provide significant support to jobs and activity.
"And the MPC continues to expect that any future increases in interest rates would be at a gradual pace and to a limited extent."
"Fully 60% of mortgages are now at fixed interest rates.
Even with this Bank Rate increase, many households will re-finance onto lower interest rates than they are currently paying by around 30 basis points for those moving from an expiring two-year fixed rate deal to around two percentage points for someone refinancing an expiring five-year fixed rates deal.
It will mean an increased squeeze on consumers with loans and mortgages, thus nipping their spending and in turn affect the economy. It may well turn out to be a vicious loop, especially as Brexit woes continue to weigh down on the UK's economy
1.40pm GMT
Q: There are forecasts that the City could lost 75,000 jobs though Brexit - so could the banking sector force the Bank of England to rethink its plans if they trigger their own Brexit contingency plans?
Carney sounds relaxed about this possibility.
1.37pm GMT
Q: How bad would Brexit have to get before the Bank revises its forecasts downwards?
Mark Carney says that UK businesses are, in general, expecting a transition deal to be agreed between Britain and Brussels.
1.34pm GMT
Q: Ten years after the financial crisis, are we reaching a point where the downside of loose monetary policy (low interest rates and QE) are outweighing the benefits?
No, Carney replies. He argues that the benefits are still worth it -- and any negative consequences (such as income and wealth inequality) can be tackled through other measures.
1.32pm GMT
Q: Is today's interest rise partly due to concerns over the pound? Are you trying to prop up sterling to prevent it weakening too much as other central banks change monetary policy?
No, says Carney firmly.
1.31pm GMT
More from Carney on Brexit:
Carney says the Bank can "help make Brexit a success" by targeting inflation at 2% and ensuring the stability of the banking system
Even more from Carney: Getting inflation back to 2% will help make Brexit a success https://t.co/G9kDKUk5UR
1.29pm GMT
Q: How can we boost the UK's productive capacity? Have you any advice for other policymakers?
Carney bats this question straight over to deputy Ben Broadbent -- perhaps the governor doesn't want to stir up a row with the government!
1.25pm GMT
Q: Is the MPC fundamentally split over the path of monetary policy [after today's 7-2 split], or will you move as one in future?
Impossible to say, Carney replies. The Monetary Policy Committee have a range of views, and the public the media will hear from them in the coming weeks.
1.22pm GMT
Q: The Bank's estimate of the supply capacity in the UK economy is much lower than independent forecasters. So what do you say to people like Boris Johnson, who say you're a pessimist, or Jacob Rees-Mogg who calls you an enemy of Brexit?
Let's not personalise this, Carney shoots back, saying he'll ignore the last part of the question.
The message to the people of the United Kingdom is that the Bank of England is doing its job..... to bring inflation sustainably back to target while supporting jobs and activity.
Chris Giles of the Financial Times is slapped down by Mark Carney for personalising his question #InflationReport
1.19pm GMT
Q: Are you comfortable with the market forecasts for two more rate hikes during the next three years?
Carney says that on a 'broad-brush' basis, it gets the Bank roughly where it wants to be on inflation and growth. That's a yes, then.
1.17pm GMT
Q: Today's inflation report doesn't suggest that the economy has improved, compared to August's report. So why raise rates right now, rather than waiting to see how the economy performs in the next few months?
Carney says that 'unit labour costs' have risen (even if wages haven't), showing that firms are facing higher costs for employing people.
#Carney why now? "Must pay attention to infl target so there's credibility on inflation as we move into Brexit'. He may come to regret that
1.12pm GMT
Q: How high will interest rates rise before the Bank of England starts to unwind its bond-buying stimulus scheme?
Carney declines to give a target, but says the BoE's plan is to use interest rate changes as their primary tool before turning to QE.
1.10pm GMT
Deputy governor Ben Broadbent suggests that we're all getting too excited about today's rate rise.
Before the crisis, interest rates would move every four months he says.
1.09pm GMT
Q: The last time the Bank of England raised rates (in 2007), it was forced to cut a few months later. So if the same thing happens again, will it be a nimble response or can we say you've made a mistake?
Carney leans towards the 'nimble response' option (of course!).
.@BenChu_ goes for it, asks Carney if this will be seen as a policy mistake. "Let me reflect on that," he says, to moderate laughter.#BoE
1.02pm GMT
Q: Many people will be surprised to hear you say that real wages will start rising soon. Why do you think that?
The UK inflation rate (currently 3%) should start falling in 2018, Carney replies. That means the cost of living will take a smaller bite out of wages.
12.58pm GMT
Q: Today's rate rise follows several interest rate rises in America, with more expected. In Europe, the ECB will slow its stimulus programme in January....
So...are global central banks now moving together to withdraw the stimulus pumped into the world economy since the crisis?
'The UK is participating a little less in this global upswing' - BoE Governor Carney
12.54pm GMT
Carney says weak productivity since the crisis, "reinforced" by Brexit, is constraining the speed limit of the economy before prices rise.
12.54pm GMT
Carney says that the Brexit vote has exacerbated Britain's long-standing productivity problems, by deterring businesses from making new investments.
This is affecting the amount of spare capacity in the UK economy (a key factor on how fast the Bank will raise interest rates).
12.50pm GMT
Carney drops a hint that the Bank will rethink its forecasts if Britain agrees a deal with Brussels:
Carney says the Bank could recalibrate monetary policy if a Brexit deal is agreed.
12.49pm GMT
Q: Should banks pass this rate rise onto savers?
We do expect it to be passed on, Carney replies, pointing out that banks passed on last August's rate cut.
12.47pm GMT
Here's a video clip of Mark Carney speaking at today's press conference:
These are not normal times for Britain's economy, Mark Carney says after rate increase https://t.co/SzHlofIBvi pic.twitter.com/dGlLKHrPwp
12.46pm GMT
Q: Is today's hike the start of a rate rise cycle?
Mark Carney says the Bank's forecasts are based on two more rate rises over the forecast horizon (the next three years).
12.46pm GMT
Deputy governor Sir Dave Ramsden is alongside Mark Carney - but he refuses to say why he voted AGAINST today's interest rate hike.
Dave Ramsden ducks the opportunity to say why he voted against the Governor - as one of the 2 members to vote for a hold
12.44pm GMT
12.43pm GMT
Governor Carney is now taking questions.
Q: Why have you raised interest rates today, and pushed up the cost of living for millions of people?
12.40pm GMT
Onto Brexit, and Carney says Britain's exit from the EU is the biggest factor determining the country's long-term economic prospects.
He says the Brexit vote has already pushed up prices and weighed on growth.
Mark Carney: "The decision to leave the European Union is already having a noticeable impact." Marked slowdown in the economy #Brexit
12.38pm GMT
Mark Carney insists that UK households are "well positioned" for today's interest rate rise.
Most mortgages are on fixed-rates, he continues. And many people who refinance their mortgages soon will probably move to cheaper rates than before.
Carney says further rate hikes will be gradual and limited. Says monetary policy will continue to support jobs and activity
12.36pm GMT
Mark Carney begins his press conference by confirming that Bank Rate has been raised by 0.25% to 0.5%.
He says that with prices rising, and spare capacity falling, inflation is "unlikely to return to the 2% target" without an increase in interest rates.
The time has come to ease our foot off the accelerator.
12.32pm GMT
Over at the Bank of England, Mark Carney is facing Britain's economics journalists to explain today's interest rate rise.
You can watch it live here.
12.30pm GMT
Future interest rate rises will depend heavily on Britain's exit from the EU, says Trevor Greetham, Head of Multi Asset at Royal London Asset Management:
We expect the Bank of England to wait and see before making further changes. As the Bank made clear in their statement, Brexit is still the elephant in the room and there are considerable risks to the economic outlook and to sterling, which sold off in the aftermath of the announcement.
"Nearly eighteen months on from the referendum, all options remain plausible. It's hard to imagine a continued tightening of monetary policy in a disruptive no deal outcome, and in this scenario sterling could easily fall another 10 to 15%. On the other hand, if permanent single market membership becomes likely, or if we see a reversal of the decision to leave the EU, the Bank of England would be comfortable raising rates further. In this case, sterling would probably rise 10 to 15%.
12.29pm GMT
Don't expect much improvement in "crap" savings rates after today's rate hike, says moneysavingexpert.com's Martin Lewis.
"Low interest rates have been a plague for many with savings, especially those who retired and expected to live off the interest. So rate rises are generally good news for them - indeed we've already seen rates crawl up in expectation. The top easy access deal is now 1.3%, compared to just 1% a few months ago. This means I doubt we'll see the top best-buys rise by the full 0.25% over the next few weeks. With a little bit of crystal ball gazing I'd say we'll see them max out at 1.4% to 1.5%.
"Yet many people have money in savings accounts already paying pitiful, spitworth rates like 0.1%, and they are unlikely to rise. Those in a middling account paying about 0.5% may see an increase over the next few weeks. But if you're earning less than 1%, it's a crap account anyway so you should ditch and switch."
12.28pm GMT
Millions of Britain's homeowners and credit card holders have never experienced an interest rate rise before. So today's rise could be a nasty shock.
Yael Selfin, chief economist at KPMG UK, explains:
Long suffering savers will rejoice in today's news of a first rise in UK interest rates in over a decade, but banks and insurers should also beware of the potential impact on their liabilities as their customers feel the strain. Consumers are already under pressure from falling real wages and the rise in consumer debt. So even a mild and gradual course of rate rises is likely to make a bigger impact this time.
"A decade of no rate rises has made many households complacent about the prospects of higher interest rates when considering their finance
12.25pm GMT
Today's interest rate hike might be the last one for a while, says Jeremy Cook, chief Economist at WorldFirst.
"The all-important guidance for the future is that this may be the only rate rise for a while.
For the Bank to drop the line that 'rates may need to rise more than the market expects' is not a supportive move for future rate rise expectations.
MPC couldn't come out and say 'this is a one and done hike' but these minutes are hardly supportive of a ladder in rates from here
12.21pm GMT
TUC General Secretary Frances O'Grady says the Bank of England has blundered by raising interest rates today.
"This is the last thing hard-pressed families need. With living standards falling, the economy needs boosting not reining in.
"Today's hike is a hammer blow for those in problem debt, whose repayments will now rise.
12.19pm GMT
Another important point -- the Bank of England has dropped its warning that interest rates might rise faster than the City expected over the next few years.
That reference was included in the minutes of September's meeting, when the Bank said:
If the economy were to follow a path broadly consistent with the August Inflation Report central projection, then monetary policy could need to be tightened by a somewhat greater extent over the forecast than the path implied by the yield curve underlying the August Report.
This is important
*BOE DROPS LINE THAT RATE MAY NEED TO RISE MORE THAN MKT EXPECTS
12.12pm GMT
The Bank of England has also warned that Britain's decision to leave the European Union is having a "noticeable impact on the economic outlook".
It says:
The overshoot of inflation throughout the forecast predominantly reflects the effects on import prices of the referendum-related fall in sterling. Uncertainties associated with Brexit are weighing on domestic activity, which has slowed even as global growth has risen significantly.
And Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures.
12.08pm GMT
Right, this is important.
The Bank of England says it only expects interest rates to rise gradually over the next three years.
"The MPC now judges it appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to target.
All members agree that any future increases in Bank Rate will be at a gradual pace and to a limited extent,"
Any futures UK rate hikes will likely be "at a gradual pace and to a limited extent", says the Bank of England. Sterling falls sharply. pic.twitter.com/asWtLIUHZm
12.04pm GMT
It's official:
MPC vote by a majority of 7-2 to raise #BankRate to 0.50% pic.twitter.com/rkVgh6AZyX
12.03pm GMT
Today's decision wasn't unanimous.
Two deputy governors, Sir Jon Cunliffe and Sir Dave Ramsden. both voted to leave borrowing costs unchanged.
*BOE'S CUNLIFFE, RAMSDEN DISSENTED, FAVORED NO RATE CHANGE
12.00pm GMT
BREAKING: The Bank of England has voted to raise UK interest rates, for the first time in over a decade.
Interest rates are going up to 0.5%, from 0.25%.
11.59am GMT
Stand by your desks, folks, the Bank of England decision is just 60 seconds away....
11.58am GMT
The Bank of England tweets.....a link to Mark Carney's press conference at 12.30pm :)
Watch the #InflationReport press conference at 12:30pm today: https://t.co/6rhBj3eMMG pic.twitter.com/DSmonz4hnn
11.55am GMT
Tension is mounting in the City (and the newsroom!) as the clock ticks towards noon.
Will they? Won't they?
"We've known for some time that the zero rate era can't go on forever. But with continued high levels of debt in the economy and business lending remaining anaemic compared to historic levels, there is a real question mark over how appropriate a rise would be - and that's not to mention the uncertainties around Brexit.
Rises can harm the economy by killing off consumer spending, so it looks as if the Bank of England has found itself between a rock and a hard place on this one.
11.53am GMT
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11.42am GMT
Less than 20 minutes to go! And sterling is falling as the City prepares for the Bank of England's rate decision.
The pound has lost half a cent against the US dollar to $1.319, as jitteriness builds.
GBP losing ground fast into the BoE announcement pic.twitter.com/KgaFyFbhvD
UK Pound dipping below US $1.32 do they know something ( Bank of England voted yesterday) or just pre announcement nerves? #interestrates
11.38am GMT
Economist Danny Blanchflower was on the MPC the last time it raised interest rates, in July 2007.
Blanchflower voted against (it was a 6-3 split),and he's also vote against a rate rise today if he got the chance.
Last time BoE hiked in July 07, MPC split 6-3
- @Barker4Kate, Besley, Gieve, King, @asentance, Tucker
- Bean, @D_Blanchflower , Lomax
11.30am GMT
Here's a list of the eight men and one (!) woman who set UK monetary policy, and decide whether interest rates go up today.
11.21am GMT
Betting firm smarkets tells me there's an implied probability of 87% that UK interest rates will rise from 0.25% to 0.50% today.
So, the markets could be rather lively if the Bank of England surprises us at noon...
11.09am GMT
In classical economics, a central bank would raise interest rates when it worried that the economy was rattling along too quickly, pushing inflation too high.
But that's not the case this time. So some economist are worried that the Bank of England might hike interest rates because it is pessimistic, not optimistic, about the UK's prospects.
In the MPC's view, spare economic capacity has been eroded and inflationary pressures will start to build at a lower rate of growth than in the past.
In effect it used to think the UK economy was capable of motoring along at 70 miles per hour before the vehicle began to shake and the ride became uncomfortable. They now think that persistent engine troubles have lowered that speed limit to around 50 miles per hour and so, despite the fact that we used to drive much faster, they are moving to put their foot on the brake already.
The Bank of England shouldn't raise interest rates, says @DuncanWeldon-here's why https://t.co/6kd0hmX52d
10.40am GMT
After a decade of record low interest rates, British savers should welcome a hike today.
But they shouldn't celebrate too loudly -- a quarter-point rise in borrowing costs won't make them much richer.
Today's long-awaited rate rise may seem like welcome news for UK savers, but it will be a double-edged sword for many Brits, giving slightly better cash savings returns with one hand, then taking them away in the form of higher debt repayments, with the other.
Savers should check their sums before celebrating. Assuming all the benefits of the rate rise are passed on to the consumer, which is by no means a given, a 0.25% increase will give a saver with a 20k pot just 50 extra per year in returns.
10.30am GMT
With 90 minutes to go, here are some reminders of how the world was different back in July 2007, the last time UK interest rates rose.
The biggest banks in the world the last time they hiked" #bankofengland pic.twitter.com/mwrM74KQc8
Number one in the UK the last time they hiked". #bankofengland https://t.co/pcQ3xOSDvV
Premier League Champions the last time they hiked" #bankofengland pic.twitter.com/pSoc46pAcB
10.16am GMT
Any homeowner on a variable-rate mortgage will take an immediate hit in the pocket if the Bank of England raises interest rates today.
But that's only around one in ten households in the UK, compared to around 20% a decade ago.
Big trends are 1) less of us own a home 2) more owners own outright (lucky people) 3) there has been a big move towards fixed rate mortgages pic.twitter.com/2t68yUdx3e
The combination of these three trends - falling home ownership, growing outright ownership, and the shift towards fixed rate mortgages - means that only around 11 per cent of families have variable rate mortgages in Britain today. And they have smaller mortgage balances than those that have fixed - an average of 70,000 compared to 96,000.
To estimate the overnight mortgage impact of a rate rise, we can look at what happens if we add 0.25 percentage points to the interest rates paid by the 11 per cent of families with non-fixed rate mortgages. The result is an average increase in repayments of families of 6.40 a month (or 1.3 per cent of their existing repayments). Spreading the cost across all mortgage holders, the average repayment increase is just 2.50 a month.
The impact will grow over time as people move off fixes and if rates rise further. Markets expect them to be just over 1% in 2021. pic.twitter.com/U7jw9nQOQA
9.42am GMT
Newsflash: Britain's building sector returned to growth last month.
That's according to data firm Markit, whose Construction PMI has risen to 50.8, up from 48.1 in September. Any reading over 50 shows a rise in activity, so this is good news.
UK construction sector maybe out of a technical recession but this feels little more than mean reversion and confidence remains weak
#UK construction activity rises only marginally in Oct, while optimism falls to
lowest in almost 5 years https://t.co/28Zj7xx5ch pic.twitter.com/qntyymeVMP
9.31am GMT
A group of demonstrators have gathered outside the Bank of England.
They're from Positive Money, a group pushing for 'QE for People' -- the idea that Britain creates new money to spend on green infrastructure, education or other social benefits.
"A decision today to raise rates at a time when real wages are falling risks shortening the fuse on Britain's ticking household debt time bomb.
The Bank of England needs new policy tools which can deliver a sustainable boost to incomes, such as QE for People."
Related: How the actual magic money tree works
9.19am GMT
Communication is one of the most important implements in a central banker's toolbox, as he or she can move the markets with words as well as actions.
Greek philosopher and mathematician Pythagoras of Samos famously said that "Silence is better than unmeaning words". This is something that the Bank of England's Monetary Policy Committee (MPC) members have arguably neglected: they have repeatedly signalled a rise in their rock-bottom policy rate only to fail to delivery such a rise....
Fresh academic research has found that in the presence of rising economic uncertainty, monetary policy tightening becomes less effective. The reason is that elevated uncertainty motivates agents to postpone decisions until more precise information becomes available, and this cautiousness makes them less responsive to changes in the economic environment, including the interest rate. The implication for the UK, where Brexit related economic uncertainty is indeed on the rise, is that an interest rate hike of 25 basis points on Thursday will have a much smaller impact on inflation and GDP growth than conventional wisdom suggests.
This poses a challenging dilemma for MPC members. Do they hike in order to remain credible, or do they continue to 'wait and see'? If the MPC vote to hike, subsequent hikes will be necessary in order to meet the inflation target over the medium term. This comes at the expense of depressing GDP growth further. Our view is to abstain until the uncertainty cloud of Brexit negotiations starts to clear. The MPC members should take Pythagoras' advice and only signal with intent.
9.05am GMT
Bloomberg's Peter Hoskins points out that UK borrowing costs have been at historically low levels for the last decade - even lower than in the Great Depression and the second world war.
As @bankofengland is expected to raise rates for the first time in more than a decade, this chart shows just what unusual times we live in. pic.twitter.com/7XQEuZO3Uw
9.04am GMT
City investors and traders will be desperate for clues from the Bank of England about how interest rate could move over the coming years.
That's because the long-term path of rates is more important than a mere 0.25% move.
With a rate hike all but a done deal today, attention will focus on the guidance for the coming year, with markets pricing in one further hike by the end of 2018.
Nonetheless, with the economy slowing and Brexit looming, today's hike might yet prove a "one and done" event.
8.48am GMT
Today is a historic day for the Bank of England whether it raises interest rates or not, says Lee Wild, Head of Equity Strategy at Interactive Investor.
A hike will be the first in a decade; another month of stalemate will damage the credibility of both the central bank and Mark Carney as governor.
An overshoot on inflation is almost entirely down to the weak pound, but unemployment at a 42-year low and a slew of improving data reflect an economy more than capable of coping in a higher interest rate world.
The timing isn't great for families struggling with the lag in wages growth to inflation, and who are now beginning to plan their Christmas budgets. Brexit is already causing many to rethink their spending, so rate-setters must tread carefully to avoid a policy mistake further down the line.
8.46am GMT
The financial markets reckon there's a 90% chance that UK interest rates are raised at noon today.
Overnight index swaps are pricing in a 90.1% probability that the Bank of England will raise rates later today.
If @bankofengland MPC raises rates today, will this be the most pre-expected news announcement ever?
8.37am GMT
The pound is bobbing nervously around the $1.326 mark this morning, as City traders brace for today's interest rate decision.
Sterling is likely to move sharply at noon. It'll surely fall if Carney and colleagues leave rates unchanged, but could rally if the Bank hikes and hints at further rate rises down the line.
8.08am GMT
Good morning.
It won't be a 25bp hike, rather a reversal of last year's referendum-inspired cut. Not beginning of Fed-like normalisation #boe #gbp
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