Reaction to Bank of England decision (03/02/22)
by Shafiq Shabir
Head of Electronic Trading, Intertrader
The Bank of England’s decision to raise interest rates for the second time in a row suggests that the floodgates are well and truly open for more of the same this year.
Spurred into action by the ever-increasing cost of living squeeze, the increase marks the first time since 2004 that Threadneedle Street has enacted consecutive hikes. Given that December’s rate decision was taken at a time when Omicron cases were rocketing, and pandemic-related impacts are now receding, there were far fewer factors holding the MPC back in tackling rampant inflation. Indeed, this month’s hike was all but confirmed when January’s data showed inflation soar to 5.4% year-on-year, and had been priced in well ahead of time by the market.
The reality is, despite the hype around two months of rising rates, they remain at a historically low level, and more action will be needed – and expected – to drag down inflation.
Published: 3 February 2022
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