4 May 2023 - BoE hike to take rates well into restrictive territory
The fight against inflation that the Bank of England has been waging since December 2021 is likely to reach a crucial stage next week when it is expected that the Monetary Policy Committee will hike short term interest rates by twenty-five basis points. There is no longer any mystery to the Bank’s actions as it set out its stall many months ago confirming that it will use tighter monetary policy as the instrument that it will use to dampen demand and by doing that reduce price pressures in the economy. While commentators and analysts try to drive some interest in the MPC meeting, it has been obvious for a considerable time that interest rates were headed into restrictive territory. Traders have become immune to the rise in rates having any effect on the strength or otherwise of the pound, particularly as the tightening of policy has been a common theme throughout the G7 since the middle of last year. However, following the Fed’s rate hike and somewhat dovish statement on future actions we may see some differential develop in Central Bank actions. While journalists continue to present theories as fact, based on their own interpretation of the data, it now seems likely that rates have reached the level that is considered optimum. 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.