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Sterling tumbles after resounding BoE rate hike

Sterling fell after the Bank of England’s resounding interest rate hike, the biggest since 1995, in its attempt to tame inflation that is expected to exceed 13% in the coming months.

In particular, the BoE raised its interest rate by 50 basis points to 1.75%, while warning that the British economy is on the brink of a long recession.

Immediately after the rate hike, sterling turned lower, falling 0.2% to 1.2122 against the greenback, erasing a 0.3% rise to $1.2184 recorded shortly before the BoE’s announcement. Sterling is also down 0.5% against the euro.

The Bank of England has warned that the country’s economy will begin to contract in the last quarter of 2022, a trend that will continue throughout 2023, making the coming recession the longest since the one that followed the financial crisis of 2008- 2009.

At the same time, he estimates that inflation is likely to peak at 13.3% in October – which will be the highest level since 1980 – mainly due to the increase in energy prices caused by Russia’s invasion of Ukraine.

In her previous estimates, she spoke of peak inflation above 11% and almost zero economic growth until at least 2025.

Source: Capital

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