With the news that the Bank of England has raised interest rates to 0.5%, Tommaso Aquilante, UK Lead Economist at Dun & Bradstreet, said: “Today’s Bank of England announcement to raise interest rates to 0.5% was expected. However, the fact that four out of nine Monetary Policy Committee members voted to increase the rate to 0.75%, indicates that the BoE is committed to limiting the erosion of purchasing power driven by price increases and also to bringing inflation back to target (2%). Although today’s increase still leaves interest rates at historically low levels, the hike is likely to be felt by households and businesses.
“Businesses, especially those that trade internationally or use suppliers that operate in international markets, will need to act to hedge against potential financial risk triggered by appreciations in the GBP/USD or GBP/Euro exchange rates. While such appreciations could make UK exports less competitive, they could also stimulate imports, thus impacting business’ bottom line. To assess financial risk and other external risks properly, businesses will need to have a comprehensive view of their supply chain, across markets and business partners.”