Australia not expected to feel the effects of first UK rate rise in a decade

Australia’s interests rates are not expected to rise following the UK’s first interest rate hike in a decade.

The Bank of England lifted the base lending rate by 0.25 percentage points to 0.5 per cent overnight, reversing an emergency cut in August 2016 following Britain's vote to leave the European Union.

Experts predict the Reserve Bank of Australia won’t be influenced directly by the UK’s decision.

”By August 2018 the market thinks there’s a roughly 50 per cent chance that Australia will see a hike to 1.75 per cent, (but) the Bank of England decision hasn’t influenced that,” Edward Park, Investment Director at UK investment management firm Brooks Macdonald, told 9news.com.au

“Because it is widely seen as a one-off reversal of the stimulus they provided post the Brexit referendum last year rather than a reaction to inflationary pressures.

“Central banks across the world are keen to ensure they are not left ‘behind the curve’ which means that inflation rises faster than they expect and they are forced to catch up with aggressive interest rate hikes,” Mr Park added.

The central bank’s governor, Mark Carney, told reporters the decision came about because it was acting to "support the economy during the adjustment process" for Brexit.

"With unemployment at a 42-year low, inflation above target and growth just above its new, lower speed limit, the time has come to ease our foot off the accelerator,” Mr Carney said.

A report by the bank's Monetary Policy Committee highlighted strong global economic growth and said "domestic financial conditions are highly accommodative and consumer confidence has remained resilient".

It said the committee "now judges it appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to the target [of two per cent]".

"In many respects, the decision today is straightforward ... Of course, these are not normal times," Mr Carney said.

"Brexit will redefine the UK's relationship with our largest trade and investment partner. And it will have consequences for the movement of goods, services, people and capital as well as the real incomes of UK households."