Bank of England Hikes Rates Again
Riding in a hawkish mood, the Bank of England has hiked its rate for the fourth time, up 25 basis points to 1%. Though, analysts said there are further signs that policymakers believe market rate hike expectations have gone too far.
Bellwether economies around the world are booking a fast and furious benchmark interest rates hike to combat high inflation rates that appear to have dented economic performance.
Yesterday, Federal Reserve FOMC announced a 50 basis point rate hike after it has taken a 25 basis point upward adjustment in March. Some analysts are also projecting another 75 basis point hike at the next meeting.
“We expect another 25 basis points hike in June and potentially also August before the committee presses the pause button”, ING Economics James Smith said in a commentary share with MarketForces Africa on Thursday.
The Bank of England has hiked rates by a further 25 basis points, taking Bank Rate to 1%.
“No surprises there, but financial markets went into the meeting pricing further hikes at every remaining meeting this year.
“Look closely, and there are clear hints that the overall committee thinks that is going to be too aggressive”, ING explained in its commentary note. READ: Dollar Mixed After Powell Says FOMC Open to Larger Rate Hikes
The Bank’s new forecasts – while pointing to double-digit inflation later this year – show the consumer price index (CPI) below target at the three-year horizon.
Growth is set to fall by almost one percentage point in the fourth quarter, and depressingly the Bank’s forecasts show that GDP is projected to be only half a percentage point bigger at the end of 2024 than it is now.
Unemployment, while set to fall further this year, is set to rise by almost two percentage points by the end of the forecast period, ING.
“Expect more hikes, but not as many as markets expect. We’d already pencilled in another rate rise for June and we suspect on the basis of today’s split decision, another one could follow in August”.
But the new forecasts, taken together with the increasing division among committee members, suggest the Bank is getting closer to a pause in its tightening cycle. #Bank of England Hikes Rates Again