The British pound sank against the US dollar Thursday, after the Bank of England (BOE) announced its first rate hike in over ten years.
The British pound fell from $1.322 to $1.313 against the US dollar, when the central bank announced its decision and appraised the markets with its views.
The detail that likely sent sterling lower, was confirmation of only a gradual tightening pace of monetary policy, going forward.
The statement accompanying the 0.25% rate rise to 0.50%, showed the Monetary Policy Committee (MPC) will watch the economic performance and related details very closely, before making further changes to interest rates.
“In line with the framework set out at the time of the referendum, the MPC now judges it appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to the target,” the BOE statement read.
“Monetary policy continues to provide significant support to jobs and activity in the current exceptional circumstances. All members agree that any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent,” it also stated.
The MPC voted 7-2 to raise rates at the November meeting.
Lenders to pass on rate rise
Some UK high street banks immediately announced their intention to pass the full 0.25% rate increase on to their savings customers.
Coventry Building Society and Yorkshire Building Society said they would increase the variable savings rate by 0.25%. TSB, meanwhile, said the savings rate in its variable rate accounts would rise, as would its variable mortgage accounts, too.
UK Finance encouraged anyone who has a loan or mortgage, who thinks the rate increase could adversely impact their ability to make repayments, to contact their lender.
“Rates remain very low by historical standards and borrowers remain well placed to get a good deal from the UK’s increasingly competitive mortgage market,” said June Deasy, Head of Mortgage Policy at UK Finance.
“Anyone with concerns about managing their mortgage should contact their lender as soon as possible to discuss the advice and support available,” she added.