The Old Lady of Threadneedle street hiked rates for the first time in a decade on Thursday 2 Nov, 2017. Rates went up 0.25%, back to their pre-referendum level.
It shouldn't matter really. It's a tiny figure and it was a relatively temporary reduction to begin with. However, as the market reaction is telling us (GBP down, Gilts up) it did matter. It mattered most likely because 17 months post-referendum, the UK economy and its future prospects are decidedly worse off. Inflation is almost at the 3.1% level where Carney needs to write to Treasury to explain the failure in containing inflation to the 2% level. More importantly, the BoE believes the UK GDP will only grow at 1.5% from here on out. That's 60% of the 2.5% growth rate we had since WW2. That's bad news bears.
And it gets worse. Here is a summary of key metrics since the 2007 crash (From FT)
Since the last rise in Bank rate on 5 July 2007:
- GDP is 10.9 per cent higher;
- Productivity (output per hour) is 0.5 per cent higher;
- Average prices (CPI) are 27.7 per cent higher;
- Real pay excluding bonuses is 2.5 per cent lower;
- The FTSE 100 is 12.9 per cent higher;
- 10-year gilts are 4.1 percentage points lower;
- $/£ is 68 cents lower;
- Unemployment - the rate is 1 percentage point lower;
- Employment - the rate is 2.5 percentage points higher - 2.7m more people are in employment.
To put it simply, people have lost 3% of their income but everything costs ~28% more likely because we import everything and the £ has lost value. Salaries aren't even keeping pace with productivity change which is abysmally low anyway so it seems the only reason GDP grew at all is that there are simply more people in the UK working, paying taxes and buying evermore expensive biscuits.
