empty
16.12.2021 03:44 PM
New Year's gift from the Bank of England: an unplanned increase in the interest rate took place

The Bank of England unexpectedly raised interest rates for economists, traders, and, first of all, banks. This is the first increase since the pandemic. Thus, the World Bank government has finally discarded the threat to the UK economy, which is broadcast by records of coronavirus lesions. The Bank of England has become the first central bank with the highest-profile that will be able to cope with rising inflation.

New Year's gift from the Bank of England: an unplanned increase in the interest rate took place

This image is no longer relevant

Today, Thursday, December 16, 2021, the members of the Monetary Committee of the Bank of England, headed by Chairman Andrew Bailey, voted 8:1 in favor of raising the cost of borrowing by 15 basis points, to 0.25%, which provided an increase that has not yet been made by any other central bank of the "Big Seven" since the beginning of the crisis. Silvana Tenreyro was the only dissenter. At the same time, politicians did not fail to point out that a more "moderate" tightening is likely to be required, as inflation is approaching a peak, which is expected to be about 6% in April 2022.

In addition to emergency response during the pandemic, this is also the first time that officials have gathered for an unscheduled meeting - since the introduction of planned in 2015. Only recently, a planned meeting took place without shocks: the bank left its monetary policy unchanged.

Of course, this move is a response to the danger posed by a sharp rise in prices: a report this week shows that inflation jumped to 5.1% in November, more than double the Central Bank's target. The forecasts were also influenced by Tuesday's employment report, showing that British companies have increased the number of jobs at a record pace, which indicates a fairly rapid economic recovery.

"The labor market is tense and continues to narrow, and there are some signs that the pressure on domestic costs and prices is intensifying," the Bank of England said in comments. "Although the Omicron option is likely to put pressure on short-term activity, its impact on medium-term inflationary pressures is unclear at this stage."

Taking these circumstances into account, the chief European economist of Goldman Sachs Group Inc. said that an outcome without changes would be unprofitable, although this is exactly what he expected from the Bank of Great Britain.

"Another 25 basis point increase in February would be good," said Fabrice Montagne, chief economist at Barclays. "If this is done, MPC will also be able to start reducing its balance sheet, while the maturity of bonds from his portfolio will begin in early March."

Assumptions are confirmed by the comment of the Bank of England, which also warned of further measures: "The Committee still believes that there are bilateral risks concerning the inflation forecast in the medium term, but that some moderate tightening of monetary policy during the forecast period is likely to be required to achieve the inflation target of 2".

The markets are counting on another 20 basis points of base price growth in February, which implies an approximately 80% probability of a transition to a 0.5% increase in the next period. This would allow the Bank of England to immediately put an end to its policy of reinvesting its overdue quantitative easing bonds, which would allow up to 37 billion pounds of government debt to be written off from its balance sheet by the end of 2022.

This is the first increase by the Bank of England since 2018. As a result, the central bank's purchases of government bonds amounted to 875 billion pounds ($ 1.2 trillion), compared with 435 billion pounds before the crisis. The Central Commission has raised rates only once in the last 45 years and not once since it was granted independence in 1997.

Omicron is raging

Economist Dan Henson: "At the December meeting of the Bank of England, concerns about inflation outweighed concerns about omicron. This step is a gamble - perhaps the economy will ignore the new version of COVID-19, but no one knows for sure. Assuming that the virus does not slow down the economy significantly, we expect the next step in May, although there is a small risk that the Bank of England will rise again in February."

The abrupt transition of the Bank of England to a policy tightening regime, of course, surprised the vast majority of economists who did not expect such drastic changes, followed by investors who estimated the probability of movement by a maximum of 40%. This result was the second unexpected one after the November decision to hold the unsuccessful financial markets.

Of course, the increase will affect only bondholders so far, that is, mainly the banking sector.

"The Bank of England's decision to raise interest rates was unexpected given the growing uncertainty about the economic impact of the Omicron option," said Suren Thiru, head of economics at the British Chamber of Commerce. "Although today's rate hike may have little impact on most firms, many will consider it the first step in a longer political movement."

Alas, while the country is in the grip of a new wave of coronavirus caused by a more contagious variant of omicron, due to which the daily number of cases in the UK has reached the highest recorded total since the beginning of the pandemic.

The danger that could lead to an overload of the country's health services is such that the government of Prime Minister Boris Johnson has re-imposed some restrictions on activities, and in the coming days and weeks, if the outbreak cannot be overcome, new measures can be expected.

Despite this factor, the Bank of England heeded the warning of the International Monetary Fund, published this week. In it, the institution warns regional economies against inaction regarding inflation. The commission members paid much more attention to employment and the fact that after the cancellation of incentive measures in September, there was no significant jump in unemployment.

Later on Thursday, the European Central Bank is due to explain its plan to phase out emergency stimulus. However, the day before, President Christine Lagarde tried her best to convince investors that a rate hike in the euro area would not happen in the near future.

But the US Federal Reserve has already set a hawkish tone ahead of the Bank of England's announcement, signaling three rate hikes next year and accelerating the winding down of its stimulus program, while Norway continued its tightening efforts on Thursday, having already completed the second increase this year.

Since the news was published, the pound has risen by 0.8%, while the yield on 10-year UK bonds jumped by 7 basis points after this decision. Traders now expect the Bank of England's key rate to rise to 1% by September. The FTSE 100 stock index declined.

Egor Danilov,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Egor Danilov
Start trade
通过InstaForex赚取加密货币汇率变动的收益。
下载MetaTrader 4并开启您的第一笔交易。
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

推荐文章

納斯達克衝高:Nvidia 飛漲,Citigroup 收盤創 2008 年高點

週二,納斯達克綜合指數再創新高,主要受到Nvidia股價飆升的推動。與此同時,其他主要華爾街指數下跌,因投資者對最新的通脹報告和銀行業盈利報告熱情不高。

Thomas Frank 08:02 2025-07-16 UTC+2

7月15日美國市場新聞摘要

Gilead Sciences 的股票在從支撐線強勢反彈後,顯示出增長的跡象,預計將上升至 3 月 10 日的高點 119.89。 與此同時,百度持續下跌,為對沖提供了有利條件。

Ekaterina Kiseleva 14:16 2025-07-15 UTC+2

比特幣突破12萬美元,納斯達克創新高:市場渴望更多動力

美國股市週一以小幅上漲收盤,因投資者對唐納德·特朗普總統最新的貿易威脅採取謹慎而非行動。本週將是繁忙的一週,包含豐富的經濟數據以及財報季的開始,因此市場保持相對穩定。

Thomas Frank 10:18 2025-07-15 UTC+2

市場緊張:特朗普瞄準歐盟,關注通脹和中國數據

在亞洲市場週一全面下滑後,華爾街和歐洲股票指數週初也出現下跌。投資者對美國最新一輪的貿易戰言論作出反應,儘管許多人認為這可能只是施壓策略而非堅定承諾。

14:48 2025-07-14 UTC+2

美國市場新聞摘要 - 7月14日

Donald Trump 宣布對來自歐盟和墨西哥的商品徵收30%的關稅。市場初步反應消極,但S&P 500指數在大型股的助漲下部分反彈。

Ekaterina Kiseleva 14:36 2025-07-14 UTC+2

市場緊張:特朗普對歐盟、通脹和中國數據即將公佈

週一的亞洲交易時段,華爾街期貨和歐洲股市下滑,因投資者對美國重新威脅徵收關稅作出反應。儘管語氣強硬,許多人仍認為特朗普總統的言論可能僅限於空話。

Thomas Frank 10:40 2025-07-14 UTC+2

股票熱潮:Nvidia 突破4萬億,Bitcoin也不甘示弱,道瓊與標普上漲

美國股市指數週四小幅上漲,S&P 500及納斯達克綜合指數均收於歷史高位。市場受到Delta Air Lines樂觀的盈利預測及Nvidia創紀錄收盤價的提振。

Thomas Frank 08:37 2025-07-11 UTC+2

Nvidia 創歷史:市場上升,公司市值突破 4 兆美元大關

週三,美國股市由科技股為主的納斯達克指數領漲,Nvidia市值一度突破4兆美元,加上美聯儲會議記錄暗示今年可能降息,為股市帶來強勁的收盤表現。 Nvidia在週三早晨成為首家市值達到4兆美元的公司,彰顯其在人工智慧領域的主導地位。

Thomas Frank 10:46 2025-07-10 UTC+2

7月9日美國市場新聞摘要

美國股票指數本場交易以溫和變動收盤:S&P 500小幅下跌,納斯達克100指數略有上漲,道瓊斯指數則進入負值區域。 投資者密切關注中國的動向,預期將有新的刺激措施來應對不斷增長的通貨緊縮壓力。

Ekaterina Kiseleva 14:03 2025-07-09 UTC+2

特朗普重返行動:50%銅關稅,對中國和歐盟的更多打擊

在美國貿易政策的一個新的急劇轉變中,前總統特朗普星期二宣布對進口銅產品徵收50%的關稅,並表示即將推出長期威脅的半導體和藥品的關稅。這些措施標誌著全球貿易對抗中的一個重大升級,已經擾亂國際市場。

Thomas Frank 09:49 2025-07-09 UTC+2
现在无法通话?
提出您的问题,用 在线帮助.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.