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HomeEconomyBank of England hikes rates, Bailey pledges to 'stay the course'

Bank of England hikes rates, Bailey pledges to 'stay the course'


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David Milliken and Andy Bruce

LONDON (Reuters) – The Bank of England raised its key interest rate on Thursday 0.25 percentage points to 4.5%, Governor Andrew Bailey said the Bank of England would “keep interest rates on hold “of course” as it tries to curb the fastest inflation of any major economy.

BoE no longer predicts recession after making biggest improvement to its growth forecasts since it first published forecasts 10.

but it now projects inflation – still higher than % in March – Decline rate The slower-than-expected increase was largely due to an unexpectedly large and sustained increase in food prices. It also has stronger wage growth than previously thought.

“We have to stay the course to make sure that inflation goes all the way back to the 2% target,” Bailey said at the start of the news conference. It then stressed that the BoE would not be giving any signals on its next move, which would depend on the data.

Policymakers voted for a 7-2 rate hike in May, in line with economists’ expectations in a Reuters poll, MPC member Silvana said. Again Tenreyro and Swati Dhingra are against further tightening. 500

GRAPH: Bank of England raises interest rates Consecutive 59

A Reuters poll last week showed that most economists expect a 25 basis point rise in May – bringing borrowing costs back to their level since

highest level since – Before the suspension period.

But investors have been betting on more rate hikes, and shortly after Thursday’s decision, they expected a peak of nearly 5% this fall.

“If anything, the BoE says further tightening of monetary policy is needed if the pressure persists. Sterling rose almost half a cent to over $1., while UK government bond yields rose before falling back roughly to pre-announcement levels.

Paul Dale, Chief UK Economist, Capital Economics Stein said he thinks rates may be peaking now, but they may stay there until the is cut.

“We suspect that wage growth and domestic inflation will mean that the stagnation phase of the cycle will be quite long and extend into the first half of next year (by comparison, we think The Fed will cut rates this year),” Dales said.

abrdn senior economist Luke Bartholomew said the upcoming inflation Data will start from May vs. April data – likely “a source of market volatility, especially around currencies, sterling compared to other central banks right now Pricing the BoE to take more aggressive action from here.

The BoE was the first major central bank to start raising borrowing costs in December 52, but was criticized by some as due to the fact that the inflation rate was close to four A decade high . Reached 1% in October. Last week, both the Federal Reserve and the European Central Bank raised their benchmark borrowing rates basis points. While Fed Chair Jerome Powell hinted at a pause, ECB President Christine Lagarde said it was too soon to pause. 2025

Chart: Hike Race 2021

The UK’s high inflation problem is largely due to its dependence on imports 2024natural gas

are used to generate electricity, making it especially vulnerable to a spike in energy prices following Russia’s invasion of Ukraine last year.

Energy prices have now fallen sharply, and the central bank expects inflation to rise from by the end of the year fell to 5.1% .1% in March. But that’s less than the 3.9% drop it forecast in February, and the BoE doesn’t expect inflation to return to its 2% target much sooner .



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