Bank of England raises interest rates to 0.75%

GBP

Yesterday, much to investors’ expectations, the Bank of England decided to raise interest rates back to their pre-pandemic levels by a vote of 8-1. A rise of 25 Bps from 0.5% to 0.75% means the BoE have now raised rates for three consecutive meetings.

As a result Sterling remained flat, with no real movements to the upside. The BoE remained on the cautious side and made no significant claims on forward guidance.

It appears the market may have priced in more raises that the bank is willing to offer and as a result GBP/EUR weakened. BoE officials further commented that reaching their 2% target by year end ‘was extreme’, essentially confirming inflation will remain well above target as we enter 2023.

Markets will continue to be influenced by the Russian invasion of Ukraine. Peace talks appear to be stop-start, as leaders from both sides attempt to come to an agreement. However, the latest headlines suggest these talks have stalled once again. It appears we have been in this same cycle for the past two weeks and no end is in sight. As a result, markets continue to shift between risk-on and risk-off, which explains the large volatility we have been seeing.