If we look at the long term significance of today's rate rise by the Bank of England, it fits with continued uncertainty about Brexit and ongoing global volatility.  Before breakfast this morning, I switched my mortgage to a 10 year fixed rate deal (no great foresight - my current fixed rate expires shortly).  I have never taken out such a long term fixed rate.   I did so because the next 10 years look so unpredictable. A long term deal gives me some certainty and confidence in an otherwise volatile environment.

In the Brexit scenario planning I do with clients, we envisage that (all other things being equal), the Bank of England would aim to keep interest rates low in the event of a disruptive No Deal Brexit. Today's rise, and further  gradual increases over the coming months, may create some space for reductions if the economy needs stimulus at some point in the next few years.  Equally, if the UK and EU agree a trade agreement and we have a smooth orderly Brexit, we may expect to see continued rate rises over the next two years, managing growing inflation and shifting back to something closer to pre-financial crisis rates. Throw in possible political change in the UK (with another election a distinct possibility in the face of Brexit impasse in Parliament) and global trade wars (higher tariffs and inflation), and we could see greater fluctuation in interest rates ahead.  

Arguably the MPC's decision today gives the Bank some future wriggle room and enables it to manage very different scenarios:  it creates options for both a future reduction or a smoother increase.  It seems a sensible plan in the face of uncertainty.

That uncertainty was further confirmed today with talk of  'Blind Brexit':  whereby we leave the EU in March 2019 without any agreement on the future trade relationship between the EU and UK and this is negotiated during the ensuing 'transition' period.   In other words, we leave the EU without knowing where we are headed.  This is a kind of combination of 'deal' and 'no deal' - or a protracted limbo of ongoing negotiation and uncertainty.  To some degree this is bound to happen - there was never going to be time to agree anything more than 'heads of terms ' with the EU which would always need to be negotiated in detail after March 2019. The divisions within the government and Parliament make this more inevitable - as the UK government has spent more time negotiating with itself and the EU has ever diminishing confidence that the UK can deliver on any deal.

This makes things yet more volatile.  But uncertainty should not lead to paralysis in business. Many businesses have carried out scenario planning and in some cases are implementing their contingency plans.  And many have identified solutions that give them confidence come-what-may.  

Like me with my new fixed rate mortgage, these businesses have taken actions that give them certainty in an otherwise uncertain world and provide confidence to seize opportunities.