Bank of England boosts rates by 50 basis points

Sep. 22, 2022 7:01 AM ETFXBBy: Kim Khan, SA News Editor5 Comments

Bank Of England Monetary Policy Report Press Conference

Dan Kitwood/Getty Images News

The Bank of England continued the global tightening cycle Thursday, raising its benchmark interest rate to 2.25% from 1.75%.

The 50-basis-point-hike was expected by economists. Markets were pricing in a stronger move.

The pound (FXB) pared some earlier gains against the U.S. dollar, up 0.3% to around 1.1306.

The Monetary Policy Committee decision was not unanimous, though, with five voting for 50 basis points, three voting for a hike of 75 basis points and one vote for 25 basis points.

"The BoE delivered the 50bps hike that economists were expecting this lunchtime, though Sterling has softened as markets had priced in a more aggressive 75bps move," Caxton analyst Michael Brown said. "Three policymakers voted for such action, with one additional dissent for a 25bps move, evidencing significant division on the MPC over the appropriate response to the present toxic mix of high inflation and low growth."

"On that note, with the BoE having revised down their estimate of peak inflation, and with the MPC continuing to adopt a more cautious tone than their G10 peers such as the Fed, the quid looks to be in for a tough time ahead, with the pace of tightening only set to slow from here on in."

"Given the Energy Price Guarantee, the peak in measured CPI inflation is now likely to be lower than projected in the August Report, at just under 11% in October," the MPC said in its statement. "Nevertheless, energy bills will still go up and, combined with the indirect effects of higher energy costs, inflation is expected to remain above 10% over the following few months, before starting to fall back."

Recommended For You

Comments (5)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.