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  /  News   /  London Markets: Bank of England makes consecutive interest rate hikes for first time since 2004

London Markets: Bank of England makes consecutive interest rate hikes for first time since 2004

The Bank of England on Thursday announced its second consecutive interest-rate increase, the first time it’s done back-to-back hikes since 2004.

By a 5-to-4 vote, the Bank of England voted to take rates up by a quarter point to 0.5%. Inflation reached 5.4% in December, and prices are set to rise further. The U.K. regulator Ofgem separately announced a 54% jump in the energy price cap, a move that is effective in April.

The Bank of England forecasts inflation will peak at 7.25% in April.

“Given the current tightness of the labour market and continuing signs of greater persistence in domestic cost and price pressures, the Committee judges that an increase in Bank Rate of 0.25 percentage points is warranted at this meeting,” the central bank said.

The surprise to markets came as the four-person minority wanted a half-point rate hike. Yields on the 2-year gilt TMBMKGB-02Y, 1.144% rose, and the pound GBPUSD, +0.40% rose to $1.3610 from $1.3567 shortly before the decision.

The central bank also said it will stop reinvesting the proceeds of its portfolio of £875 billion in government bonds, but won’t begin selling them until rates have climbed to at least 1%.

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