28 April 2023 - Interest rates starting to bite
The Bank of England has been raising short-term interest rates for close to eighteen months in an effort to slow demand and by doing that lower inflation. It is only now that the base rate has reached a level that is restrictive on economic activity having been accommodative for many years. It is impossible to know without doubt when interest rates become restrictive, since it is as much about attitude as any economic data. The Bank’s intention when it began its current programme of hikes in December 2021, was for rates to become neutral, where they are neither restrictive nor accommodative, as quickly as possible, without causing undue damage to the economy. The question now for the MPC is how long do they wish for rates to be restrictive, while risking damage to the economy It is now moot whether they could have been more aggressive in the size of hikes since there were several imponderables in play that drove their decision-making. Beyond Currency Market Commentary: Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.