Returning to the pre-Brexit referendum rate of 0.5 per cent will increase borrowing costs for households, affecting mortgage payments and personal loans.
However, it will mean a strengthened pound and help to cut inflation rates, which were at 3 per cent last September.
Laura Parsons, current analyst at TorFX said the current financial climate looks positive for the pound.
“We might have had the back-to-work-blues on Monday, but the pound had a pretty good day all in all.
“Sterling rallied against almost all of its most traded rivals on renewed hopes that the Bank of England (BoE) will look to increase interest rates on Thursday.”
If Thursday’s interest rate rise does happen, it will be the first time in more than a decade that the Bank of England raises the rate.
The last time BoE increased the interest rate was back in 2007 during the credit crunch, under Melvyn King, when it rose to highs of 5.75 per cent.
Laura added the financial figures from Germany, and elsewhere in the Eurozone, will only serve to increase the GBP’s power.
“The pound’s gains against the euro also came as a result of less-than-impressive German inflation figures.
“Further GBP/EUR movement is likely to follow the release of today’s Eurozone employment, growth and inflation figures. Any disappointments are liable to keep Sterling trending higher against the euro.”
In addition to gaining on the euro, the pound is likely to rise against other currencies, including the US and Australian dollar, said Laura.
“While GBP/EUR achieved a high of €1.1371, the pound gained by over 0.5 per cent against the US, Australian, New Zealand and Canadian dollars.”
