RBI hikes repo rates by 25 basis points


All nine members of the Bank's monetary policy committee voted to push rates up to 0.75 per cent.

The Reserve Bank of India raised interest rates for the second straight meeting on Wednesday, but retained its "neutral" stance as it aimed to contain inflation while not choking growth. The central bank had increased repo rate by 25 bps to 6.25 per cent in its last policy meet in June.

In the Inflation Report accompanying the decision, the BOE kept its economic-growth predictions for Britain broadly unchanged.

The Bank of England has raised interest rates to 0.75% today, the first time it's been above 0.5% since the financial crisis a decade ago.

Other mortgage rates and savings will be reviewed in light of the Bank of England's decision.

Wraith doesn't believe that such data will stop the Bank of England from hiking rates but believes it should, particularly when considering that this behaviour is going against the bank's own forecasts.

The Bank of England indicates that although interest rates are now on the rise, they are highly unlikely to hit pre-crisis levels of above 5% for the foreseeable future.

In its statement on Thursday, the central bank said it saw "tentative signs that actual and prospective protectionist policies were starting to have an adverse impact" on global trade.

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"There is only a very remote possibility that the BOE won't hike rates on Thursday", Kathleen Brooks, research director at Capital Index said in an email.

"The Monetary Policy Committee continues to recognize that the economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of European Union withdrawal", it added. "A generation of homeowners have never experienced a rate rise, and now they have had two in the space of 12 months".

Recession was avoided and the United Kingdom economy, boosted by a more competitive exchange rate for the pound, has continued to grow, if at a more moderate rate than some of our trading partners in the G7 club of the richest nations.

What is the main reason for increasing the policy rate?

Naveen Kukreja, CEO and Co-founder, Paisabazaar.com: "Home loans will become costlier for fresh borrowers as and when the banks raise their respective MCLRs".

The majority of foreign exchange analysts maintain a cautious approach to Sterling, with many warning that any gains coming from the August rate rise will likely prove short-lived.

"It is nearly unthinkable that the Bank of England will follow up with further rate rises in the next few months given the risks on the horizon". "Growth has remained subdued, and the recent partial rebound is the least that could be expected after the lack of progress in the year's first quarter". High fuel prices can push inflation higher. However, almost 70% of homebuyers now have fixed rate mortgages so will be unaffected.

EUR/GBP at 0.90 gives a GBP/EUR exchange rate of 1.11.