The Bank of England made a decision to raise its interest rates. This is rather worrying, because this decision is taken the second time during a decade, and with that, the interest rates will be lifted to the highest values since 2009.

What is the main reason for this move?

There are some reasons to do so. The main reason is of course the Brexit moods, but to it, worries about inflation rates and a current global trading war are added.
The bank officials have taken the decision about the raise in a unanimous voting, and the interest rate was raised from 0.5% to 0.75%.
And, as it was expected, the pound value grew. Now, it is traded at 1.3111USD per one Pound.

This move is as well an effort to turn back to the monetary stimulus that has been the good support for the global economy till 2009, when the financial crisis influenced it in a negative way and tipped the global economy in a deep recession.

The move Czech central bank has increased its interest rate, as well, but in this case, this is the fifth increase for one year.
The USA Federal Reserve is still managing to hold the interest rates at a constant value. However, even they are informing already, that a change might come the next month, when they are planning to increase the interest rates.

The European Central Bank is still in the process of performing its bond-buying program, that is planned for this year.
India`s Central Bank has lifted the interest rate this week.

These actions show very clearly, that all inflation pressures have been insignificant all these years. But now, when the global economy is in growth, it is expected, that some changes in the financial world are coming. These expectations are proven by U.S Figures that have been released recently by the Organization for Economic Cooperation and Development. These figures have shown, that the global inflation rates hit their four-year-high in June this year.

The Bank of England is however optimistic about the situation in the country and the global financial situation. The Bank representatives insist, that the BOE should be able to control the inflation rates, and this rate increase will be the only one, and in the very worst case, just one more rate increase will follow this year.

The BOE governor, Mark Carney, shares as well, that some tightening in monetary policy will be needed to control the inflation rates.

The central banks of many other countries have already informed, that they will be forced to increase the interest rates, as well, because some tightening in the monetary policy would be needed. They promise, that the tightening process will be performed gradually. However, they are afraid, that the Britain withdrawal from the European Union might cause more pressure, than expected.

This withdrawal from the European Union still leaves many questions open, especially those related to the country`s economy.
This uncertainties and open questions put business investment sector under pressure and influence the productivity growth in a very negative way. So, the British economy now isn’t able to expand without the prices growth.

And that is not all. Specialists warn that this withdrawal could cause severe damages to the British economy.

In its quarterly forecasts, the BOE shares that it expects a slower growth rates in the next several years. The main factor influencing the economy is Brexit, but there are additional negative factors, as well, such as trade tensions between the USA and their former key partners, such as China and the European Union. So, now, the forecasts for the economy growth are less optimistic than they were previously. For example, the BOE said, that they expect the economy expansion for 2.75% this year, which is a drop comparing to the May expansion, which is 3%. And in 2019, the growth of only 2.5% is expected.

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