BoE hikes by 25 bps, in line with Fed
The Bank of England has increased its key interest rate by a quarter point, in line with the Federal Reserve's action. The decision was made amid concerns about the health of banks, which have unsettled financial markets worldwide. Despite this threat to financial stability, inflation in the U.K. is still in double digits, which has prompted the need for further policy tightening by BoE Governor Andrew Bailey.
The bank has stated that the U.K. banking system is resilient, but funding costs have risen. It will continue to monitor the impact of credit conditions on households and businesses. The BoE's main rate is now at 4.25%, lower than the Fed's but higher than the European Central Bank's. Economic prospects for the U.K. are weaker than its peers, and the BoE sees output falling throughout this year and into Q1 2024.
The bank is expected to be one of the first major central banks to end its tightening campaign. Policy makers globally have been raising rates without making firm commitments about future moves. The BoE last updated its forecasts on Feb. 2, with inflation expected to fall to around 4% by year-end, but still above the 2% target. The chaos among commercial banks has further obscured the outlook, and May could see the BoE pause on rate hikes.
Source:
www.barrons.com
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
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