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Mortgage holders will see their annual costs rise by around £480 for every £100,000 they owe after the Bank of England raised interest rates to 3%, Martin Lewis said. The pound fell on Thursday after the Bank raised interest rates and warned of the biggest recession since reliable records began in the 1920s. GDP could shrink for every quarter until mid-2024 if interest rates hit the market forecast of 5.2 per cent – although the Bank said it does not expect that and believes inflation will fall to 5.25 percent next year and to 1.5 percent in 2024. The Bank’s Monetary Policy Committee raised the key rate by 0.75 basis points this afternoon to 3%, after warning last month that rising inflationary pressures would require a “stronger response” than previously thought. The decision pushed interest rates to their highest since 2008 and is the eighth consecutive time the Bank has raised rates. Less than a year ago the rate was 0.1 percent.
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The Bank of England’s decision to raise interest rates by 0.75% was not unanimous
The nine members of the Bank of England’s Monetary Policy Committee were not unanimous in their decision to raise interest rates by 0.75 per cent today – the biggest single jump since the 1980s. Silvana Tenreyro and Swati Dhingra voted for smaller increases of a quarter and a half percentage point respectively, highlighting headwinds from the recession. Andy Gregory3 November 2022 19:35 1667502416
The FTSE was boosted by the fall in the value of the pound
The pound’s fall of two cents against the US dollar today helped rescue London’s top share index from the crashes seen elsewhere in Europe. Sterling closed at just under $1.12 and also posted its biggest drop against the euro since late September. In New York, the Dow Jones fell 0.1% and the S&P 500 fell 0.4% over the same period. Germany’s Dax lost 1 percent while France’s Cac 40 closed 0.5 percent in the red. In London, however, the FTSE 100 gained 0.6%, boosted by a fall in the pound, as it rose 44.5 points to 7,188.63. Andy Gregory3 November 2022 19:06 1667500180
The Bank of England could have prevented ‘unholy chaos’, an analyst suggests
The Bank of England would not be in its current “unholy mess” if it hadn’t kept interest rates low for as long as they did, an analyst suggests. “The pound was trading in the middle of the pack against the US dollar for most of this morning until the Bank of England announced it was raising interest rates by 75 bps and then spent the next hour undermining that move in what it can to be described as “Operation Housing Market Protection,” CMC Markets analyst Michael Hewson said. “The pound fell to its lowest levels in almost three weeks against the US dollar and posted its biggest drop against the euro since late September.” He added: “Of course, if the bank hadn’t kept interest rates low for so long and even flirted with the idea of negative rates two years ago, they wouldn’t be in the unholy mess they are in now.” Andy Gregory3 November 2022 18:29 1667497960
Highways mini-budget ‘damaged’ UK’s international standing, says Bank of England governor
Bank of England governor Andrew Bailey has warned that the former government’s September mini-budget has “damaged” the UK’s international standing. “I think it’s easier to lose confidence and it takes longer to get it back. And the UK’s position was affected,” Mr Bailey told the BBC. “I was in Washington three weeks ago, it was very clear to me that the UK’s position and the UK’s position had been damaged and that everyone – myself and others in particular – must roll up our sleeves and show that policy-making of the United Kingdom returned. in action, they are in action and we will deal with these issues.” Andy Gregory3 November 2022 17:52 1667496971
Sterling is likely to face further pressure against the dollar, analyst says
The fall in the value of the pound is a reaction to the Bank of England’s forecast of a recession and its much less hawkish tone on interest rates than that of the US Federal Reserve, analysts said. “The story is definitely moving from central bank pivoting to central bank policy divergence,” Michael Quinn, senior trader at Monex Europe, told Reuters. “The fundamentals in the US are certainly stronger and healthier than in Europe. It’s a very bleak scenario for Sterling at the moment.” Higher interest rates – or the expectation of them – traditionally strengthen a country’s currency, making investments there look more attractive. “While some central banks say they don’t know how high interest rates will go, the BoE says the peak is lower than what the market is pricing in,” Jan von Gerich, chief economist at Nordea, told the news agency. He warned that sterling was likely to face further pressure against the dollar. Andy Gregory3 November 2022 17:36 1667495897
Sterling falls more than 2%
The pound is on course for its biggest one-day fall against the dollar since Liz Truss’ disastrous mini-budget was unveiled in September. Sterling fell sharply on Thursday after the Bank of England said borrowing costs were likely to rise less than markets expected and warned the economy was headed for a protracted recession, even as it raised interest rates to a record high. three decades. In unusually frank language, the BoE pushed back traders’ expectations that interest rates were likely to rise to around 5% next year. That contrasts with the Federal Reserve, which hiked aggressively once again on Wednesday and said interest rates were not yet nearing the ceiling. The pound had already fallen about 1.2 percent against the dollar on Thursday after the U.S. Federal Reserve raised interest rates aggressively and said they were not yet close to peaking, but fell sharply after the Bank of England said – falling more than 2 percent. Andy Gregory3 November 2022 17:18 1667494900
Inflation could ease to 1.5% by 2024, Bank of England says
In better news, the Bank of England expects inflation to ease to 5.25 percent next year before easing back to 1.5 percent in 2024, as long as the government continues to provide support for energy bills over the next two years. The Bank had previously forecast inflation to peak at 13% in the third quarter of this year, but with government support for household energy bills the forecast was cut to 10.9%. The government said energy support, which currently caps bills at 34p per unit of electricity and 10.3p per unit of gas, will be reviewed next April, instead of running for two years as previously promised. Andy Gregory3 November 2022 17:01 1667493940
Long-term stability is only possible with “good management of public finances”, says No 10
Only through “good management of public finances” can the government deliver “long-term economic stability”, Downing Street said. But a No 10 spokesman told reporters he would not “prejudge” anything about chancellor Jeremy Hunt’s autumn budget. Andy Gregory3 November 2022 16:45 1667492838
‘Hard choices’ ahead in fight against inflation, says No 10
Downing Street has warned there will be “tough choices” on tax and spending after the Bank of England’s interest rate hike. “The Prime Minister recognizes that this will be a worrying and difficult time for people, families and businesses across the UK,” a No 10 spokesman said in response to the Bank’s rate hike. “The number one priority for his government is to reduce inflation. There will be some tough choices, but we will ensure that we really protect the most vulnerable and that we continue to pursue long-term growth.” Pressed on whether Rishi Sunak agreed with the Bank that there would be a long recession, she said: “We recognize that people will be alarmed by these forecasts. Again, that is why, as the chancellor said, the best thing the government can do if we want to reduce rate rises is to show that we are reducing our debt. “He was clear that there are no easy choices, we [will] Tough decisions need to be made on tax and spending to get there, but economic stability is the priority for this government.” Andy Gregory3 November 2022 16:27 1667491923
The UK is heading for the worst recession of the century, the Bank of England says
The UK could be facing its longest period of recession since reliable records began a century ago, the Bank of England has warned. The economy could fall to eight consecutive quarters of negative growth if current market expectations prove correct – with growth not returning until mid-2024. However, it is expected to be a milder recession than in previous times. From its peak to its lowest point, GDP is expected to decline by 2.9 percent – a smaller decline than the 6.3 percent decline seen in the 2008 financial crisis. Maryam Zakir-Hussain3 November 2022 16:12
