December 6, 2022

BoE became the first major central bank to raise rates after the epidemic

  • BoE 8-1 voted to raise UK interest rates from 0.1% to 0.25%
  • Was the first major BoE to raise rates since the outbreak
  • UK inflation is projected to be 6% in April 2022
  • The impact of inflation will not be clear, as Omigran will affect short-term growth
  • More stable domestic inflation and job market pressures are seen

LONDON, Dec 16 (Reuters) – The Bank of England on Thursday became the first major central bank in the world to raise borrowing costs since the corona virus epidemic hit the global economy, with inflation forecast at 6% in April. Target position.

In a second surprise to investors in six weeks, the BoE said it should act even if the Omicron corona virus variant wipes out the UK.

“The labor market is tight and continues to be tight, and there are some signs of greater stability in domestic spending and price pressures,” the BoE said.

Sign up now for unlimited free access to

“Although the Omigron variant may weigh almost all term activity, its impact on medium-term inflationary pressures is not clear at this point.”

After November 30, the sterling rose nearly a full percentage point against the US dollar, and interest-rate sensitive two-year guild yields rose 9 basis points to 0.58% on December 1, the highest level since December 1.

Most economists voted by Reuters expected the BoE monetary policy committee to keep the banking rate at 0.1% due to the omigron variant of the corona virus that caused the COVID-19 cases registered in the UK on Wednesday.

“Today’s MPC’s decision to raise the banking rate underscores how concerned the outlook for inflation and inflation expectations are at risk of lowering inflation expectations if they do so before knowing the full extent of the economic damage caused by the growing Omicron variance. None” Said.

The nine-member MPC voted 8-1 to raise the banking ratio from 0.1% to 0.25%, with only outsider Silvana DeRiro voicing dissent.

The MPC has indicated that further rate hikes are likely.

“The panel continues to conclude that there are bilateral risks around the inflation outlook in the medium term, but in order to meet the 2% inflation target consistently, it is necessary to tighten monetary policy somewhat over the forecast period,” it said. Said.

Investors raised the bank rate to 0.5% by the March meeting and fully set a price target of 1% in September.

Short-term omigran success was observed

BoE lowered its growth forecast for the December and 2022 quarter due to Omicron leading to “the largest number of infections in a very short period of time”.

A meticulously observed survey of purchasing managers released earlier on Thursday showed a success for hospitality and travel companies this month, sending private sector growth to a 10-month low. read more

But the BoE said Britain and the world economy were in “economically different” conditions than they were at the onset of the epidemic, and now inflation is high.

It focused on the “reverse risks” surrounding wage trends and said there was little sign of rising unemployment after the government’s September 30 end to the government-backed Farlow program.

Even the British Central Bank Wrong foot On November 4, when many investors were holding back the bank rate, more time was set aside to see how much the labor market would be affected by the end of the plan.

At its December meeting, MPC voted 9-0 to keep the central bank’s government securities purchase plan at இல 875 billion ($ 1.16 trillion). BoE has also bought பத்திர 20 billion worth of corporate bonds.

Thursday’s rate hike put the BoE ahead of the US Federal Reserve. The central bank said on Wednesday that it was accelerating a phase of the stimulus to buy its bonds, as a first step towards raising three interest rates by 2022. read more

The European Central Bank and the Bank of Japan have refrained from raising the cost of borrowing.

The ECB further eased its momentum on Thursday but promised generous support for the eurozone economy by 2022.

Sign up now for unlimited free access to

Reported by David Milligan and Andy Bruce; By William Schomberg; Editing by Hugh Lawson

Our standards: Thomson Reuters Trust Principles.