UK faces first rate hike in 3 years
Print Edition
The Bank of England could this week raise its main interest rate for the first time in more than three years to rein in surging inflation as economies reopen from pandemic lockdowns, analysts say.
Economists are predicting that the BOE led by governor Andrew Bailey could hike borrowing costs from a record low of 0.1 percent to 0.25 percent at a regular policy meeting tomorrow.
Other central banks across the globe have recently tightened policy to cool soaring prices and still more are considering following suit.
Monetary policy-makers must also decide whether to taper huge emergency cash stimulus support that has kept economies afloat during the pandemic.
The US Federal Reserve is expected today to announce plans to begin tapering its stimulus as the world’s biggest economy recovers.
The European Central Bank and Bank of Japan are holding fire for now on rates and stimulus, but central banks in countries such as Brazil, Singapore, South Korea and New Zealand have all increased borrowing costs recently.
The Bank of Canada has ended its vast bond-buying stimulus program, and has flagged an interest rate hike earlier in 2022 than envisaged.
In the UK, the Bank of England may raise its interest rate tomorrow as it “appears more worried about the upside risks to inflation from rising underlying wage growth and higher inflation expectations than ... a month ago,” said Paul Dales, economist at Capital Economics.
The BOE’s new chief economist Huw Pill told the Financial Times in late October that the UK annual inflation rate risks shooting above 5.0 percent in the coming months from 3.1 percent currently.
For its part, the British government is forecasting an annual average rate of 4.0 percent over the next year after energy costs soared and reopening economies suffer from supply shortages.
Economists are not unanimous, however, in thinking the BoE will raise its interest rate as early as tomorrow, even as the financial markets price in such a move.
“We can’t rule out a rate hike at this meeting — indeed, markets see it as a near certainty,” said Samuel Tombs, economist at Pantheon Macroeconomics. Britain’s growth “recovery is faltering,” he said.
While the UK economy was on course to rebound 6.5 percent this year, it is forecast to cool slightly in 2022, the government said last week.
As the pandemic erupted in March 2020, the BOE slashed its key interest rate from 0.75 percent and also began pumping massive sums of new cash into the economy.
It has created 450 billion pounds (US$614.26 billion) under its quantitative easing program since March last year, when Britain imposed its first coronavirus lockdown.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
