Bank of England raises its benchmark rate by 75 basis points, its biggest hike in 33 years

[BumRushDaShow]

Last edited Thu Nov 3, 2022, 09:30 AM - Edit history (1)

Source: CNBC

LONDON — The Bank of England on Thursday raised interest rates by 75 basis points, its largest single hike since 1989, and warned of a prolonged recession as policymakers looked to temper market expectations for further aggressive monetary policy tightening.

The 75 basis point increase takes the Bank Rate to 3%, its eighth consecutive hike to the main lending rate, after the Monetary Policy Committee voted 7-2 in favor. One member voted for a 0.5 percentage point rise while one preferred a 0.25 increase. However, the Bank appeared to challenge the market’s pricing of future rate rises.

“The majority of the Committee judges that, should the economy evolve broadly in line with the latest Monetary Policy Report projections, further increases in Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets,” the MPC said, offering uncharacteristically specific guidance to the market.

The MPC noted that its updated projections for growth and inflation indicate a “very challenging” outlook for the U.K. economy as it looks to bring inflation back toward its 2% target. U.K. GDP is projected to decline by around 0.75% over the second half of 2022, reflecting the squeeze on real incomes from surging energy and tradable goods prices.

Read more: https://www.cnbc.com/2022/11/03/bank-of-england-raises-rate-by-75-basis-points-biggest-hike-in-33-years.html

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Article updated.

Original article -

LONDON — The Bank of England on Thursday raised interest rates by 75 basis points, its largest single hike since 1989, but struck a dovish tone as policymakers looked to temper market expectations for further aggressive monetary policy tightening.

The 75 basis point increase takes the Bank Rate to 3%, its eighth consecutive hike to the main lending rate. Economists had anticipated the less hawkish tone from the central bank after the change in the U.K. government.

New Prime Minister Rishi Sunak’s likely return to a more conventional fiscal policy after the brief and chaotic tenure of predecessor Liz Truss calmed the markets and meant that monetary and fiscal policy were no longer pulling in opposite directions.

However, inflation spiked to 10.1% in September and mortgage rates have risen sharply, placing further strain on households.

[mahatmakanejeeves]

1. Good morning. The last increase was ...

Bank of England hikes by 50 basis points, says UK may already be in recession

Source: CNBC

LONDON — The Bank of England voted to raise its base rate to 2.25% from 1.75% on Thursday, lower than the 0.75 percentage point increase that had been expected by many traders. Inflation in the U.K. dipped slightly in August but at 9.9% year-on-year remained well above the bank’s 2% target. Energy and food have seen the biggest price rises, but core inflation, which strips out those components, is still at 6.3% on an annual basis.

The BOE now expects inflation to peak at just under 11% in October, down from a previous forecast of 13%. The smaller-than-expected hike came as the bank said it believed the U.K. economy was already in a recession, as it forecast GDP would contract by 0.1% in the third quarter, down from a previous forecast of 0.4% growth. It would follow a 0.1% decline in the second quarter.

Numerous analysts, along with business association the British Chambers of Commerce, have previously said they expect the U.K. to enter a recession before the end of the year. As well as energy price shocks, it faces trade bottlenecks due to Covid-19 and Brexit, declining consumer sentiment, and falling retail sales.

The BOE dropped its key rate, known as the bank rate, down to 0.1% in March 2020 in an attempt to prop up growth and spending at the onset of the coronavirus pandemic. However, as inflation began to rise sharply late last year, it was among the first major central banks to kick off a hiking cycle at its December meeting.

Read more: https://www.cnbc.com/2022/09/22/bank-of-england-raises-rates-by-50-basis-points-in-seventh-consecutive-hike.html

{snip}

That was followed a week later by ...

Bank of England to Buy Bonds in Bid to Stop Spread of Crisis

[BumRushDaShow]

2. Good Friday Eve morning!

Looks like a bit of PM whiplash across the pond but will have to see what happens next month, particularly with holiday shopping season underway.

And I briefly saw a news headline about the U.S. 10-year Treasury Bond yields when it had dropped below 4% on Tuesday but it's back up above at the moment.

[muriel_volestrangler]

3. Worse: Bank of England expects UK to fall into longest ever recession

In its outlook for the UK economy, it said the country would face a "very challenging" two-year slump and unemployment will nearly double.
...
A recession is defined as when a country's economy shrinks for two three-month periods - or quarters - in a row. Typically companies make less money, pay may fall and unemployment rises.

The Bank now believes the economy already entered a "challenging" downturn this summer, which will continue next year and into the first half of 2024 - a possible general election year.

While it will not be the UK's deepest downturn, it will be the longest since records began in the 1920s, the Bank said.

https://www.bbc.co.uk/news/business-63471725

[mahatmakanejeeves]

4. My goodness, that certainly is a lot of red ink this morning.

https://finance.yahoo.com/

[BumRushDaShow]

5. Yeah

I was getting the breaking banners at the close yesterday about the futures.

[GreenWave]

6. Good mourning for UK's economy.

My how conservatives know how to run an economy....


.... into the ground.