More bad news for borrowers as interest rates go up again – with worse to come

The economy is going to have to adjust to the end of the era of cheap money, which will probably prove to be quite painful, writes James Moore

The Bank of England’s Threadneedle Street HQ under grey skies (AP)

It’s a good time to be a banker, at least for those towards the top of the hierarchy who qualify for fancy bonuses linked to revenues and profits.

First, the government is proposing to cut tax for banks by £1bn to promote the City’s competitiveness. Now the Bank of England has hiked interest rates to 0.5 per cent, in what is the first back-to-back rise since 2004. That’s just gravy.

The vote in favour of a 0.25 per cent increase was 5-4, when many forecasters had expected it to be unanimous. But it was, at least, in favour of a rise. The dissent arose over the size. There were four hawks on the Monetary Policy Committee (MPC) who voted in favour of boosting rates to 0.75 per cent.