{"id":26116,"date":"2023-06-22T15:31:55","date_gmt":"2023-06-22T19:31:55","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/bank-of-england-hikes-rate-by-a-surprise-half-point\/"},"modified":"2023-06-22T15:31:56","modified_gmt":"2023-06-22T19:31:56","slug":"bank-of-england-hikes-rate-by-a-surprise-half-point","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=26116","title":{"rendered":"Bank of England Hikes Rate by a Surprise Half-Point"},"content":{"rendered":"
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The Bank of England increased its key interest rate by a bigger-than-expected half-point on Thursday.\u00a0 It did not follow the Federal Reserve\u2019s move of standing still for a meeting while it waits for more data.<\/p>\n

Most economists expected a quarter-point move. It\u2019s the 13th consecutive increase after starting with rates close to zero in December 2021 and brings the benchmark to 5%, the highest level since 2008.<\/p>\n

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The central bank warned that borrowing costs may need to rise further. The U.K. is coping with the worst inflation among the Group of Seven countries. The annual rate of price gains held at 8.7% in May, more than four times higher than the BOE\u2019s 2% target. By comparison, the U.S. inflation rate is around 4%.<\/p>\n

The gap explains why the U.K. can\u2019t afford to mimic the Fed. Not only has headline inflation come down more slowly than anticipated, but services inflation is still picking up and wage gains are accelerating. That raises worries that inflation is becoming embedded in the economy, adding to the urgency of forceful action from the central bank.<\/p>\n

\u201cInflation is still too high and we\u2019ve got to deal with it,\u201d BOE Governor Andrew Bailey said in a statement. \u201cIf we don\u2019t raise rates now, it could be worse later.\u201d<\/p>\n

None of the rate-setting Monetary Policy Committee actually voted for the quarter-point hike that had been anticipated. Seven members supported the\u00a0<\/strong>bigger half-point move, while two were in favor of keeping interest-rates unchanged. The pound was little changed against the dollar after the decision.<\/p>\n

\u201c<\/strong>There had been significant upside news in recent data that indicated more persistence in the inflation process,\u201d the BOE said in minutes of the meeting. \u201cIf there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.\u201d<\/p>\n

Like the Fed, the BOE has also warned that past interest-rate increases take time to have their full effect. That\u2019s particularly true in the U.K., where a substantial number of homeowners with mortgages will refinance imminently. Many two-to-five-year low-rate deals that were struck before rates started rising are coming up for renewal.<\/p>\n

\u201cExpect more mortgage market mayhem after this big bazooka rate hike,\u201d said Gary Smith, a partner at financial planners Evelyn Partners. \u201cThe repricing of home loans looks like it will now be more dramatic and protracted.\u201d<\/p>\n

Separately, the central banks in Switzerland and Norway also increased interest rates on Thursday. The Norges Bank delivered a bigger-than-expected half-point move and it said plans to raise rates again in August.<\/p>\n

Write to Brian Swint at brian.swint@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The Bank of England increased its key interest rate by a bigger-than-expected half-point on Thursday.\u00a0 It did not follow the Federal Reserve\u2019s move of standing still for a meeting while it waits for more data. Most economists expected a quarter-point move. It\u2019s the 13th consecutive increase after starting with rates close to zero in December […]<\/p>\n","protected":false},"author":1,"featured_media":25822,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-26116","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nBank of England Hikes Rate by a Surprise Half-Point | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The Bank of England increased its key interest rate by a bigger-than-expected half-point on Thursday.\u00a0 It did not follow the Federal Reserve\u2019s move of\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=26116\" \/>\n<meta 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