After Mark Carney poured cold water over the potential of a rate hike in the first quarter, which given the dip in economic activity we saw back then was the right thing to do, the Bank of England have today decided that the time is right to increase interest rates by 25bps to 0.75%. Sterling has strengthened on the back of this confirmation of a rate hike, helped also by the fact that there were no dissenters as all 9 MPC members voted for the hike.
In the accompanying statement the MPC referred to the economy continuing to develop broadly in line with their expectations and stated that ongoing tightening would be appropriate albeit at a gradual pace. They also tweaked the growth forecasts for next year up to 1.8% from their previous estimate of 1.7%.
Overall, as we know uncertainty remains; however the economy seems to have enough confidence now to weather this rate hike and if some clarity were to appear in terms of where the UK stands in the Brexit negotiations, then this could open up further room for Sterling to strengthen.