INSTANT VIEW-Bank of England delivers first rate hike in three years, gilt yields rise

LONDON, Nov 5 (Reuters) - The Bank of England raised interest rates for the first time in over three years on Thursday and warned that at least one more increase was likely if the US-Iran conflict continues.

The central bank's Monetary Policy Committee (MPC)voted 8-1 to raise rates to 4% from 3.75%, but in contrast to expectations in a Reuters poll, the dissent came not from a policymaker seeking to keep rates on hold but one seeking a bigger hike.

Sterling edged up after the decision and was last trading at $1.3477 versus $1.34534 earlier . It stood at 83.25 pence per euro , a touch firmer on the day.

UK bond or gilt yields rose , , with rate-sensitive two-year yields up around 2 basis points at 4.76%. London's blue-chip FTSE stock index was last up 0.7%.FTSE

COMMENTS:

ED HUTCHINGS, HEAD OF RATES, AVIVA INVESTORS, LONDON:

"Today’s BoE decision to raise interest rates was fully expected, and with inflationary concerns remaining elevated, further hikes look increasingly likely, even if these are characterised as simply ‘insurance hikes’.

The MPC will have growing worries over second round effects and will likely want to get ahead of this, especially so ahead of the New Year wage settlements."

DAVID REES, CHIEF ECONOMIST, SCHRODERS, UK:

"The Bank of England has been reluctantly dragged into a global hiking cycle driven by imported energy inflation. But this is not the start of an aggressive tightening campaign. Ultimately domestic inflation remains relatively well behaved, and there is still slack in the economy.

"While growth and labour-market data have improved recently, we think UK interest rates will peak at 4.25% - well below the path currently priced by markets."

SUSANNAH STREETER, CHIEF INVESTMENT STRATEGIST, WEALTH CLUB, UK:

"A hike was widely expected, so it hasn't set off fireworks on financial markets, but it will give borrowers a shiver as budgets become stretched in the year ahead.

"The cold reality of an era of higher interest rates is hitting home, with three further rate hikes being priced in by financial markets."