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Bank of England Makes First Rate Hike in 10 Years

The Bank of England has raised its prime lending rate to 0.5% from 0.25%, marking the central bank’s first such increase in a decade.
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The Bank of England has raised its prime lending rate to 0.5% from 0.25%, marking the central bank’s first such increase in a decade.

BOE also indicates it will make two more quarter-point increases between now and the end of 2020. The moves aim to control inflation, which climbed to 3% in September compared with a target of 2%.

The bank cautions that the pace at which the British economy can expand without increasing inflation has dropped to about 1.5% from the 2%-2.25% norm before the global financial crisis began at the end of 2008. The economic slump prompted the bank to cut its 5% interest rate to 0.5% in six steps over five months.

BOE points out that the uncertain effects of the U.K.’s decision to leave the European Union in 2019 has damped investment and thereby slowed economic growth. BOE cautions that it will take years for the country’s households, businesses and financial market to adjust to a post-Brexit economy.

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