ICYMI: BoE rate decision
In case you missed it, the Bank of England has kept the benchmark rate unchanged for a second consecutive meeting at 5.25%. This after the US Federal Reserve left rates unchanged at 5.5%, offering relief to markets.
(Video Transcript Summary)
BoE keeps rates steady at 5.25%
In this video, the Bank of England's (BoE’s) decision on interest rates is discussed. Traders are expecting the rates to stay the same at 5.25%. The BoE will release a report with forecasts on inflation and economic growth.
In the UK, inflation is even higher than in the US and Europe, at a significant 6.7%, which means that things are getting more expensive. The UK has been having a tough time in the economy lately, with no growth for the past five quarters (15 months). They just barely avoided a recession a while back.
Now, the BoE has to decide whether to change interest rates or not. Since inflation is still really high, they'll probably want to keep interest rates high too. In their last meeting, some members voted to keep rates the same while others voted for a rate hike. The head of the bank, Andrew Bailey, took the side of those who wanted to keep rates the same.
Sterling susceptible to higher rates
Investors will be watching the reaction in the market very closely. If the bank makes a comment that suggests they might raise rates in the future and the vote is close again, the British pound might go up in value. But it's not expected to be a big jump. The BoE also pays attention to the value of the British pound compared to the euro, and right now it's not doing too well.
The BoE decided to keep interest rates unchanged at 5.25% and most of the policymakers agreed with that decision. They think it's too early to lower interest rates and want to keep them high for a while. They predict that inflation will go down to below 2% by the end of 2025.
Higher oil price can lead to higher inflation
The BoE also expects the economy to grow a little bit – by 0.5% in 2023 and 0.25% in 2025 – so, they don't think there will be a recession. The bank's plan is similar to what the US Fed is doing, which is being ready to act if inflation gets worse.
Another thing they're worried about is the price of oil going up, which could lead to even higher inflation and interest rates. But for now, the decision seems to be to keep things stable as long as inflation keeps going down and the economy stays steady.
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