The Bank of England has raised interest rates for a fifth time in succession to tackle soaring inflation despite growing fears over the strength of the economy.
In a move widely anticipated by City economists, the Bank’s monetary policy committee (MPC) voted to increase its key base rate by 0.25 percentage points to 1.25%.
Commenting on the decision, Giles Coghlan, Chief Analyst at HYCM said: “Today, the Bank of England has held its nerve with a dovish 25bps hike, in light of slowing growth and the prospects of a negative 2023 GDP. Prior to the announcement, the most recent surge in inflation from the U.S. had caught the attention of short-term interest rate markets (STIR) for the BoE this week, with analysts pricing in a 71% chance of a 50bps hike in the run up to the announcement.
“On this occasion, however, the central bank has opted to resist temptation. Faced with mixed signals from the U.K. economy, the Monetary Policy Committee has had to weigh a tight labour market, the cost-of-living crisis and surging energy prices against Government intervention with fiscal stimulus. With the threat of triggering Article 16 also looming in the backdrop, policymakers clearly want to avoid hitting the brakes too hard on an economy that is already stalling of its own accord. Traders and investors should watch for GBP weakness and a potential rate cut in 2023.”
Jatin Ondhia, CEO of Shojin ading his thoughts saying: “Today’s decision is no surprise; the Bank of England’s dovish stance is expected as its battle with runaway inflation is only just beginning. In reality, the question right now is how much higher will interest rates go?
“Given the current macroeconomic challenges, it is imperative that investors monitor how different markets and assets are faring, rethinking their strategies accordingly. Diversification and agility could prove key in navigating this testing climate, and it should be expected that most resilient markets – such as real estate –…
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