Bank of England raises interest rate by 50 basis points

Bank of England raises interest rate by 50 basis points

The Bank of England (BoE, for English acronym) raised its benchmark interest rate from 1.75 to 2.25% and assured it would continue to “respond aggressively, as necessary” to inflation, despite the economy entering a recession.

The Bank of England also estimated that the British economy will contract by 0.1% in the third quarter, which, combined with lower production in the second quarter, fits the definition of a technical recession.

“If expectations point to further persistent inflationary pressures, including from higher demand, the committee will respond aggressively, as necessary,” using language similar to that in previous months to reference its comments, the BoE said. political intentions.

The financial institution now expects a maximum inflation of 11% in October. Consumer prices slowed from 10.1% in July to 9.9% in August, their first decline in nearly a year.

Today, Economy Minister Kwasi Kwarting will provide further details on the budget plans.

Norway joins

Norges Bank also raised its benchmark interest rate by 50 basis points to 2.25%, as most economists had expected, and said future increases would be gradual.

Norway’s central bank had forecast the possibility of a rate hike again in November, but its forecasts on the path point to a smaller increase, according to economists.

The interest rate, which is at its highest level since 2011, will rise to 3% during the winter, the bank said, adding that the outlook is more uncertain than usual.

The Norges Bank explained that the official interest rate was at zero a year ago, and the increases are already starting to affect the Norwegian economy, and “this may indicate a more incremental strategy in setting official interest rates in the future.”

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Nordea Markets considered that “the latest trajectory of rates indicates increases of 25 basis points in the future and is on the weak side of what the markets expected in advance.”

Switzerland gives up negative rates

For its part, the Swiss National Bank (SNB) took a turn in its monetary policy and announced an increase in the main interest rate 75 basis points to 0.5%, which puts an end to the seven-year negative rate, with the aim of fighting inflation that is hitting the country

The Swiss National Bank does not rule out further increases to ensure price stability in the medium term. Although inflation fell from 9.1% in the eurozone, it rose to 3.5% in August (the highest level since 1993), due to higher energy prices.

Although 80% inflated

Turkey reduces it to 12%

On Thursday, the Turkish Central Bank cut the main interest rate for the second month in a row, from 13% to 12%, as the Turkish pound reached its lowest level against the dollar.

The Turkish currency was trading Thursday morning at more than 18.38 pounds per dollar, a level never seen before.

The central bank, which had already cut its key rate by one percentage point last month, justified its decision by citing “doubts about global growth and geopolitical risks” once again.

In June, Turkish President Recep Tayyip Erdogan (who favors growth and exports over price stability) called for further rate cuts after several months of stabilization.

Contrary to classical economic theories, the Turkish president considers that higher interest rates favor inflation. As a result of his highly criticized monetary policy, the Turkish pound is in a free fall.

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The interventions of the Central Bank and the announcement at the end of June of a support measure for the Turkish pound had little effect.

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