Economy

RBI increases key rate to 6.5% on inflation worries

RBI increases key rate to 6.5% on inflation worries”

Bank of England governor Mark Carney has warned about the risks associated with Brexit.

Inflation is a worry: Good monsoon and a higher-than-usual increase in government-guaranteed price for crops will raise farmers' income, then rural demand and then inflation.

The jump in interest rates is a small win for savers - which amounts to around 45 million people, according to official figures.

How many more rate rises can we expect?

The Bank of England raised its benchmark interest rate to the highest level since 2009 in what may be its final blow against inflation before the United Kingdom leaves the European Union.

5 out of 6 MPC members voted for a hike.

"The first is that the journey upward is likely to be a slow grind indeed, so trends aren't going to reverse overnight".

John Macintosh, head of tax in for Deloitte in scotland, said: "Sub-trend growth and a cloudy outlook hardly make a compelling case for a higher United Kingdom rates".

No. None of these fixed-rate deals will see an immediate rise.

Kallum Pickering, Senior Economist with Berenberg Bank, agrees that the avoidance of chaotic Brexit will pave the way for a steeper path of interest rate rises.

Adhil Shetty, CEO, BankBazaar.com: "In June, several leading banks including SBI had increased their MCLR".

He said: "We believe that the odds still favour the Bank of England lifting interest rate from 0.50% to 0.75% on Thursday after the August MPC meeting - most likely following a split vote".

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".

Fixed-rate mortgages started to rise after November's increase.

Alex Day asks: Will this affect the interest rate on student loans? That figure is now 90% for new mortgages, and two-thirds of all home loans.

The decision to raise rates will be a blow to some borrowers on variable rate mortgages, but will offer relief to savers who have seen paltry returns on deposits since rates have languished at 0.5% or below since 2009. This means savers must be on the ball to ensure they get the best possible deal.

"This is hopefully the first step on the road to a more normal level of interest rates - following the lead from the US Federal Reserve".

Image copyright Getty Images Luis asks: What is the reason for increasing interest rates when the economy has a slowdown? The economy is undoubtedly much stronger today than in 2009.

The u-turn in May and the lack of attempt from the MPC to try and dampen financial market expectations of a hike point in one direction, John Wraith, strategist at UBS wrote in a note on Monday. Headed by governor Urjit Patel, the central bank raised key policy rates to the highest in two years for the second time in a row in last two months to tackle inflationary pressures.

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