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Due to softening inflation, the Bank of England has stopped its 14th consecutive interest rate hike and kept the rates at 5.25%. Despite this, the economy remains uncertain.
Following data showing a softening of inflation, the Bank of England has decided to end 14 consecutive hikes in interest rates and kept it at 5.25%. According to cnbcThe Monetary Policy Committee voted 5-4 in favor of not raising rates at its September meeting, while 4 members indicated they would prefer an increase of 0.25 points to 5.5%.
The Bank of England’s decision comes a day after the US Federal Reserve announced that it will not raise interest rates despite not achieving the desired inflation percentage.
England is raising interest rates from the end of 2021
England has been one of the countries hardest hit by inflation, leading the Bank to impose significant interest rate increases from December 2021 in an attempt to control or at least slow inflation, which has reached a 15-year high. Went.
However, new data suggests that the country’s monetary policy has had a positive impact, as there has been an annual increase in the general consumer price index (an indicator used to measure the evolution of prices of goods and services consumed by households). (and hence used to measure the country’s inflation) declined to 6.7%, much lower than the estimated 7%.
Although the latest inflation data suggests a reprieve from rate hikes, Bank of England Governor Andrew Bailey cautioned that inflation remains above target, and he does not rule out further increases if necessary. For now, they will keep rates high while continuing to work to curb inflation.
“Our previous increases in interest rates are working, but let me be clear that inflation is still not where it should be, and there is absolutely no room for complacency. We will keep a close eye to see if further increases are needed, and we will have to keep interest rates high for a long time to make sure we get the job done,” he said.
Bank of England faces inflation challenges despite stable rates
The British pound declined and fell 0.7% against the dollar following the Bank of England’s decision not to raise interest rates. However, this devaluation may be partly due to the strengthening of the dollar following the US Federal Reserve Chairman’s announcements jerome powell That they will not raise interest rates in September.
Powell was clear in his words presentationThis shows that despite the decline in inflation, they have not yet achieved their targets, so they will maintain their hawkish stance throughout 2023, potentially leading to a new rate increase before the end of the year.
Hussein Mehdi, a macro and investment strategist at HSBC Asset Management, noted that despite the Bank of England’s decision not to raise rates, “the UK economy is already facing a recession.” The strategist warned that there is a strong possibility that major developed economies, including the United Kingdom, will enter recession in 2024, noting that the current restrictive monetary conditions point towards recession.
So, while the Bank of England halting rate hikes is good news, the country’s economic situation remains fragile.
Marco is a passionate journalist with a deep addiction to cryptocurrency and a keen interest in photography. He is interested in business and market analysis. He has 5+ years of experience working with cryptocurrency projects.
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