Bank of England Hiked Interest Rates Again, GBP/USD Drops


Fourth Straight Rate Hike

The Bank of England (BoE) delivered its fourth straight rate hike, as expected today, marking the longest tightening streak since 2007. This was another 25 basis move voted by a majority of six members, which brought interest rates to 1%, while three officials dissented in favor of a larger half-percentage point increase. [1]

The central bank now projects interest rates moving as high as 2.5% in the second quarter of 2023, with most members of the Committee judging that "some degree of further tightening in monetary policy may still be appropriate in the coming months".

Furthermore, the Bank of England will now consider beginning the process of selling UK government bonds held in the Asset Purchase Facility, but no specific decisions have been made yet.

Surging Inflation & Slowing GDP

The back-to-back rate hikes are driven by surging inflation, with the Consumer Price Index (CPI) having jumped 7% year-over-year in March, constituting the highest rate in the National Statistics series which began in January 1997 and the highest in the historic modelled series since March 1992.

Officials expect further increase in the consumer prices, now seeing CPI peaking at a shocking 10%+ in the last quarter of the year, noting that "Global inflationary pressures have intensified sharply following Russia's invasion of Ukraine".

Trade the News: View our Economic Calendar

This has led to "a material deterioration" of the economic activity outlook and UK GDP is expected to "slow sharply over the first half of the forecast period", despite the higher estimate of 0.9% growth for Q1 2022.

GBP/USD Reaction

The pair comes from four negative months and plunges to fresh nearly tow year lows following the BoE decision. Yesterday it had rebounded after the Fed's largest rate hike in more than 20 years.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.



Retrieved 04 Dec 2023

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