The Bank of England raises rates by 50 basis points, which has rattled markets that could see the return of a strong pound past this inflationary crisis.
According to what transpired from insiders in the City, the Bank of England was poised for a surprise move, a major rate hike that would represent a shift in the cost-of-living struggle.
By June 2022, analysts were making gloomy forecasts for inflation in England and across the kingdom.
While the United States of America, confronted with firm and steady rate hikes, was seeing the CPI curve fall and Europe stand at 9.1%, across the English Channel there were even fears of rising to 13% within the year.
The news of the forecast had worried markets and investors who were heavily exposed with UK-related stocks or businesses.
Since then things have not changed and inflation shows no sign of abating, the US Federal Reserve will also meet today and we will know whether Powell will opt for a 75 basis point hike (which the market seems to have already discounted) or go straight for the 100 basis points that would bring the overall rate to a 300 basis point increase in this year.
Bank of England pushes on rates
Now, however, even the Kingdom of Charles III, having digested the changes to 10 Downing Street and to the throne over the painful passing of Queen Elizabeth II, is preparing to change pace.
The idea that a hard stance is needed has also made inroads in the corridors of the British Central Bank, which intends to press for a monstrous rate hike, according to inside sources.
A 50-basis-point hike represents the most intrusive intervention in British monetary policy in 27 years, the Italian newspaper “Il Sole 24 ore” reported.
With a tweet, Bitcoin Archive underlined the news about the rumor in this way:
💥NEW: Bank of England considering biggest rate rise in 33 year of +0.75% – Bloomberg
— Bitcoin Archive (@BTC_Archive) September 19, 2022
“NEW: Bank of England considering biggest rate rise in 33 year of +75% – Bloomberg”.
Not guessing right though, since the rise was instead 50 basis points. Hence it was largely absorbed by the market which was expecting 75 basis points.
Europe is also awaiting a rate hike with inflation just above that of the US. This problem is also holding back the European machine which in the words of the President of the European Central Bank (ECB), Christine Lagarde, is the main evil to be fought decisively.
Brussels is aligning itself with the rest of the world and is aiming straight for a rise of at least 75 basis points that will try to keep the euro in the wake of the US dollar, which these days complicit with a stronger economy in its own country has taken value against the currency of the old continent.
With a turnaround not seen in decades, the pound brings rates to 175 basis points overall, recovering something momentarily over the dollar and placing itself as third in the special ranking of reserve currencies that see the US dollar first by a 40% gap, the euro at 20% and the pound at 5%.