Sterling drop after United Kingdom rate hike questions point of the exercise: McGeever

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The central bank said it expected Thursday's rate hike, the first in over a decade, would be followed by just two more quarter-point increases over the next three years.

He said: "Because the Bank of England has been wrong up until now, both on interest rates and of course on Brexit, I suspect that it's not that significant because I don't think we'll see another increase for some time".

Interest rates were adjusted from 0.25 per cent to 0.5 per cent in a bid to keep a lid on inflation.

Nearly four million households face higher mortgage interest payments after the rise, but it should give savers a modest lift in their returns. All members agree that any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.

The Bank estimates that nearly two million mortgage holders have not experienced an interest rate rise since taking out a mortgage.

Sterling was also trading 0.4 percent up against the euro on Friday, after suffering its worst one-day drop on Thursday against the single currency since a "flash crash" on October 7, 2016, when a sudden plunge briefly shaved a tenth off the pound's value.

Savers are not the only ones who will see their interest rates rise - so will borrowers.

Of the 8.1 million households with a mortgage, 3.7 million - or 46% - are on either a standard variable rate or a tracker rate - which generally move with the official bank rate. 'Today's quarter point rate hike shouldn't raise eyebrows, and looks for now to be a one-off muscle flex by the Bank of England, rather than the start of an aggressive tightening, ' he said.

Although the psychological impact of the Bank of England's rise may be unhelpful in terms of wider economic confidence, today's increase is unlikely to impact heavily on the housing market, experts say.

That was in the days shortly before the financial crisis which, when it hit, saw interest rates cut and cut in efforts to get the economy growing again.

It also said Brexit-related constraints on investment and the labor supply appear to be "reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures".

He also pointed out that the rise takes rates back to where they were 15 months ago and those that have so far failed to take advantage of the record low fixed deals will find that rates have already edged up as expectation of a rate rise increased.

That weaker pound has driven up the costs of imported food, fuel and other goods. Stagnating wage growth, tight household budgets and tough Brexit negotiations are all reasons to believe the BoE will hold fire on further hikes.

The Consumer Price Index (CPI) was announced as 3 percent last month.

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