Wednesday, 26 September, 2018

RBI increases key rate to 6.5% on inflation worries

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Lindsey Cook | 03 August, 2018, 14:17

Mark Carney has warned that the possibility of a no-deal Brexit is "uncomfortably high" and will lead to higher prices, as Theresa May prepares to meet the French president, Emmanuel Macron, for talks.

The RBI today increased repo rates by 25 basis points to 6.5%, the second hike in two months, making housing and automobile loans costlier.

Several private-sector economists have challenged the BoE's view that inflation pressures are building and say raising rates now only risks a U-turn by the central bank if Britain fails to get a Brexit deal.

But, he said, there could be disruption to trade and the economy and inflation could rise if the United Kingdom leaves the European Union without a deal. "Policy needs to walk, not run".

But if you're on a variable or tracker rate mortgage, your payments are likely to go up.

However the respected Fraser of Allander think tank at Strathclyde University said that, while the increase might suit the United Kingdom as a whole, it was not ideal for Scotland.

On Thursday the BoE raised interest rates to a new post-financial crisis high of 0.75 percent but signalled it was in no hurry to raise them further.

Millions of borrowers on variable rate mortgages will be affected by the decision, with a quarter-point rise adding around £16 a month or £192 a year to the average mortgage.

Mr Carney said consumer prices would likely rise in the case of a "no deal" Brexit as companies enacted contingency plans to keep supply chains operating.

Kathleen Brooks said that one of the main things to look for will be the "mechanics of the rate decision", particularly with regard to how the vote goes in terms of who votes for what.

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The Czech central bank raised interest rates on Thursday for the fifth time in a year.

Image copyright Reuters Image caption The Bank of England is expected to raise interest rates to 0.75% How has the economy performed?

"We've already done the stockpiling", he said.

The central bank said that GDP growth rate for the April-June quarter is seen at 7.5-7.6 per cent while maintaining the FY19 growth rate at 7.4 per cent. "While a quarter-point rise may have a limited long-term financial impact on most businesses, it risks undermining confidence at a time of significant political and economic uncertainty".

Speaking on This Morning, the 45-year-old financial expert claims that millions are overpaying on standard rates.

Failure to reach a deal here will signal to markets that a no deal is in the offing and the Pound will likely finally fall to its "no deal" resting place.

"Unemployment is low and is projected to fall a little further. They must change tack and end austerity once and for all". The second is that the path to higher rates may undulate. "Either way it is bold move".

From a real estate perspective, this hike will negatively impact buyer sentiment with the logical result on quantum of sales, " said Niranjan Hiranandani, national president, National Real Estate Development Council (NAREDCO).

"However, with fixed mortgage rates still low in comparison, borrowers will be significantly better off switching deals now before it may be too late".

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