Bank of England Hikes Interest Rate

Source: Dukascopy Bank SA
At 12:00 GMT on Thursday, March 17, the Bank of England hiked its Official Bank Rate by 0.25%, increasing rates to 0.75%. The bank also published its Monetary Policy Summary.

Quoting the statement: "The MPC sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 16 March 2022, the MPC voted by a majority of 8-1 to increase Bank Rate by 0.25 percentage points, to 0.75%. One member preferred to maintain Bank Rate at 0.5%.

In the MPC's central projections in the February Monetary Policy Report, published before Russia's invasion of Ukraine, UK GDP growth was expected to slow to subdued rates during the course of this year. This in large part reflected the adverse impact of the previous, already large, increases in global energy and tradable goods prices on UK real aggregate income and spending. As a result, a margin of spare capacity was projected to open up and the unemployment rate to rise to 5% by 2025. CPI inflation was expected to peak at around 7¼% in April 2022. Upward pressures on inflation were expected to dissipate over time and, conditioned on the rising market-implied path for Bank Rate expected at the time of the February Report and the MPC's current forecasting convention for future energy prices, CPI inflation was projected to fall back to a little above the 2% target in two years' time and to below the target by a greater margin in three years.

Twelve-month CPI inflation rose from 5.4% in December to 5.5% in January, which triggered the exchange of open letters between the Governor and the Chancellor of the Exchequer that is being published alongside this monetary policy announcement. Inflation is expected to increase further in coming months, to around 8% in 2022 Q2, and perhaps even higher later this year."

Released Document

Monetary Policy Summary, March 2022

The GBP/USD currency exchange rate reacted by plummeting in ten minutes by more than 100 base points or 0.80%.

On a larger scale, the rate has bounced off the resistance of the 1.3200 mark and could once again approach the 1.3000 mark.

Initial Reaction

Larger scale situation

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Actual Topics

Thu, 17 Mar 2022 15:36:33 GMT

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