Bank of England Announces Further Hike to 0.50%

  • Banking
  • 03.02.2022 01:40 pm
  • The Bank of England has raised rates for a second time since December 2021 to 0.50%.
  • The committee voted 5-4 in favour of a hike to 0.50%, with those in the minority favouring a rise to 0.75%.
  • CPI is expected to peak at 7.25% in April 2022, a full 2% higher than was expected in November 2021.
  • Initial market reaction sees the UK 10 year government bond rise above pre-pandemic levels.

Jonathan Moyes, Head of Investment Research, Wealth Club

“This was a very hawkish statement from the bank. The committee voted 5-4 in favour of a rise to 0.50%, with the minority preferring to go even further, raising rates to 0.75%. With plans to reduce QE also receiving unanimous support the MPC is pulling on several policy levers at once.

The rate hike had been expected for several weeks, but it’s the more hawkish tone in the accompanying commentary that may take market participants by surprise. With CPI forecast to hit 7.25% in April 2022, the MPC clearly felt they needed to act swiftly to cool inflationary pressures.

Households and businesses will find little of comfort in the minutes today, the short term outlook is one of heightened inflationary pressures, whilst further out conditions appear to be increasingly recessionary. The Bank has a fine balancing act on its hands.”

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