3.6 C
New York
Friday, March 31, 2023

Don't miss

British BC raises interest rates to 4% and indicates that rate is close to peak

- Advertisement -
Softening their recession forecasts this year, the nine Bank of England officials voted 7-2 to raise the bank rate to 4.0% (Image: REUTERS/Luke MacGregor/File Photo)

THE british central bank raised interest rates for the 10th consecutive time on Thursday, but withdrew a promise to continue raising them “vigorously” if necessary and said the inflation had probably peaked.

Softening their recession forecasts this year, the nine government officials Bank of England voted 7-2 to raise the bank rate to 4.0% – the highest level since 2008 – from 3.5%.

- Advertisement -

The change was expected by most investors and economists.

The announcement came a day after the Federal Reserve slowed the pace of its rate hike with a smaller 0.25 percentage point move, but said it expected further hikes would be needed.

- Advertisement -

The Bank of England, which is trying to contain the risks of the 10% inflation rate in UK without deepening the expected recession, he said his string of rate hikes dating back to December 2021 was likely to have a growing impact on the economy.

That should help bring inflation down to around 4% by the end of this year, he said. Previously, the bank had forecast inflation of around 5% in 2023.

“If there is evidence of more persistent pressures, then further tightening of monetary policy will be needed,” the central bank’s Monetary Policy Committee said.

This represented a signal to investors that the strong rate hikes may be coming to an end.

Earlier, the Bank of England had said it would “respond forcefully as needed” to signs of increased inflationary pressure, and “and further interest rate hikes may be needed”.

Britain’s central bank projects inflation to fall below its 2% target in the second quarter of 2024, but warned there are upside risks to this forecast due to persistent labor market pressures and higher-than-expected domestically generated inflation. .

Immediately prior to Thursday’s announcement, investors were largely pricing in a 4.5% peak for the mid-year interest rate, albeit with a significant chance of stalling earlier at 4.25% as the economy Britain is likely to lag behind other wealthy nations this year.

The central bank said the UK was still on course for a recession, but likely “much shallower” than feared in its November forecast, thanks in large part to a drop in energy prices as well as rate expectations. lower market.

The estimate now is for a contraction of the Gross Domestic Product of 0.5% in 2023 compared to the forecast of a drop of 1.5% in November.

Source: Moneytimes

- Advertisement -

Latest Posts