Bank England announced latest rate hike
2022.12.15 08:04
Bank England announced latest rate hike
Budrigannews.com – For the eighth time this year, the Bank of England raised interest rates on Thursday by the widely anticipated 50 basis points (bps) to 3.50 percent.
The Bank of England (BoE), which is fighting double-digit inflation that has brought about a crisis in the cost of living and is pushing the economy deeper into recession, raised interest rates by a total of 325 basis points in 2022, making them the highest since late 2008.
The BoE was the first of the world’s major central banks to initiate a monetary policy-tightening cycle when rates in the UK began rising in December 2021.
In a letter accompanying the decision, BoE Governor Andrew Bailey wrote to finance minister Jeremy Hunt that the BoE forecasts suggested that British inflation had reached its peak, having fallen below the 41-year highs reached in October to 10.7%.
The pound declined, and the benchmark yield on British government bonds decreased by 6 basis points to 3.24 percent.
ACTION ON THE MARKET:
STOCKS: London’s blue-chip momentarily managed misfortunes and was last down 0.5%, while the , a more homegrown centered file of mid-cap stocks, was down 0.4%.
FOREX: Sterling fell against the dollar to $1.2322, down 0.9% from $1.2337 just before the central bank made its decision.
MARKETS FOR MONEY: According to interest rate swaps, investors anticipated that rates would reach a peak of 4.45% by August, compared to a terminal rate of 4.53% just prior to the decision.
COMMENTS:
NORDEA, Helsinki Chief Analyst Jan VON GERICH:
“I wouldn’t say it was dovish, but it does show that central banks are becoming uncomfortable with signaling that rates are going up in only one direction.
“There is division at the BoE, with some members voting for no change and others voting for significant hikes. This indicates that the outlook is uncertain.”
“The door is definitely open to pausing at the next meeting, but also to continuing with additional hikes.”
STUART COLE, EQUITI CAPITAL, LONDON, HEAD MACRO ECONOMIST:
“For an investor, however, this lack of coherence from the MPC likely does nothing to begin installing a sense of confidence back into the UK as a safe destination for investment,” the statement reads. “Given the turmoil we saw in UK markets in September/October and in a year that has delivered 3 prime ministers, 4 chancellors, and 2 mini-budgets.”
NAEEM ASLAM, AVATRADE, London’s Chief Market Analyst:
“Sterling is highly volatile following the monetary policy (decision) of the Bank of England, which increased the interest rate by 50 basis points in line with market expectations. Traders have been left even more perplexed by the fact that BOE members are not on the same page regarding the monetary policy of the bank.
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“The cost of living crisis is going to get even worse if interest rates rise, which would hurt the UK economy even more. This is one more explanation that the real moved lower on the rear of the bank’s choice.”
CURRENCY ANALYST, MUFG, LONDON, LEE HARDMAN:
The market initially interpreted it as less hawkish than anticipated. As a result, we have been highlighting comments describing the 50 basis point hike as “forceful,” which is yet another sign that they are slowing down the pace of future hikes, which has relieved UK rates markets.
“Aside from that, there doesn’t appear to be much of a change in the outlook for policy.” They still anticipate further rate increases.”
ROBERT DISHNER, SENIOR PORTFOLIO MANAGER, NEUBERGER BERMAN, CHICAGO, MULTI SECTOR FIXED INCOME:
“The initial response is dovish, with two members voting to maintain the rate at its current level. However, the bank appears to be keeping its options open here, citing still strong labor markets and improved growth forecasts from November. However, the most important takeaway from the pre-press conference is that two members believe the hiking cycle should end right now.
MIKE COOP, Boss Speculation Official UK, MORNINGSTAR Venture The executives, LONDON:
“Many will be glad to see the year come to an end on “Super Thursday” at the central bank. However, with the Bank of England’s second 50-basis-point rate increase and inflation continuing to rise, 2023 appears to be as rough, if not rougher, than 2022.”
PHILIP SHAW, Boss Financial expert, INVESTEC, LONDON:
Although the Bank of England’s 50 basis point increase was to be expected, the committee’s deep divisions are shocking. Even though disagreements between policymakers are common toward the end of a rate cycle, it is more difficult to predict how much interest rates will rise because of the split.
We continue to believe that cuts will occur toward the end of 2023 and that the Bank rate will reach a peak of 4.0 percent. However, the labor market data and inflation figures themselves clearly have the power to force us to change our view at any time.”
