UK interest rates are now at their highest level since 2008

GBP

The pound held its ground on Thursday after the Bank of England raised interest rates to 4.25% with a 25 basis points rise. Interest rates are now at their highest level since 2008 in a bid to cool higher inflation experienced by the UK. A majority from the Monetary Policy Committee voted for a rate rise by 25 basis points, with a vote of 7-2.

Sterling was boosted by the rate hike and reached seven-week highs against the US dollar. The BoE was surprised by the high inflation reading on Wednesday, which left no choice but to hike interest rates further.

The BoE still remains set to take a data-dependent approach regarding monetary policy – the central bank still believes inflation will fall in the months ahead so further rate hikes may not be needed.

With further rate hikes not being ruled out by the BoE, Sterling is likely to remain well supported in the near term.

Furthermore, the bank gave further guidance in regards to the economic outlook as they believe GDP is still likely to have been broadly flat around the turn of the year. However, GDP level is now expected to increase slightly in the second quarter, compared with the 0.4% decline anticipated in the February Report.

The prospects of a recession this year is diminishing and growth is likely at some point.

Key announcements

09:00 – EUR – Flash Manufacturing PMI
09:00 – EUR – Flash services PMI
09:30 – GBP – Flash services PMI
09:30 – GBP – Flash Manufacturing PMI
13:45 – USD – Flash services PMI
13:45 – USD – Flash Manufacturing PMI